Christmas Party In the USA

Have you had your office Christmas party already? If you haven't, hope it's a good one.

The recent joint Christmas party celebration of ICOM America and ICOM Canada was definitely a good one. The party started at 3 pm, pacific time, Friday 11th, at ICOM America in Kirkland, Washington.

It's Albert (@AlbertRiopel) & myself (@EarlaRiopel) second year's celebration of Christmas with ICOM. Through viewing all these related Christmas party pictures, it will give you an idea what happened before, during and after the party. Most of the pictures were taken by Albert.

Besides the delicious food, lots of drinks and sweets, we had a chance to say hi and joined in with the casino-like games. An introduction to playing cards and few games that you see in a casino was sure fun. You never know when the next time be asked to play cards and visit a real casino.

Albert did not play, but yours truly did - for learning purposes. Closer to the end, we found out that we are playing for 'real' door prizes! Each of us got $3,000 (not real money - of course). Used up my first grand and still have two grand left.

Albert was determined not to play his share, gave it to me instead. Last card-cut for a first Blackjack game - Albert coached me in this one. All five grand in just one bet - won ten grand! Albert let me reported it under my name. What a team mate!

Though we did not win any of the door prizes, we still had a great time. Right after the party, we went to our hotel at Marriott - Kirkland, such a great accommodation.

We went back to Canada the next day. Every time we visit Washington, we had to stop at our favorite Bento - Mountlake Terrace for lunch, which we did.

With a full stomach, a great Christmas party with great people and almost empty traffic at USA/Canada border  - driving on a Saturday stormy-like weather seemed like a blessing.

Merry Christmas and a prosperous New Year everyone.

Until then.

Albert and Earla

Earla Riopel's New Business and Personal Website

Earla Riopel and AccTaxDotCom Related Sites

Recently invested on a website: http://earlariopel.com/
It’s mostly for freelance writing, accounting and business related work.

This Blogger site will still carry most of my daily networking activities links.

Earla RiopelBSCom(USA), DipAcc(UBC)

Main Sites:  Website Twitter ; LinkedIn ; Facebook Blog


Preparing for the Next Fiscal Period

Century Link Field pictures (click picture) for other photos

Finally, we reached the last part of the “7 Basic Things You Need To Know During Start-up Year”. It was so much fun writing the last 6 issues, and hopefully they have been helpful information for new entrepreneurs, and for some existing ones.

Again, here’s the complete list of the 7 Basic Things You Need To Know During Start-up Year:

(1) Types of Business Organizations
(2) Choosing Business Products or/and Services
(3) How to keep business records
Hiring Employees or/and Contractors
(5) Year-end requirements
(6) Dealing with the tax authority (IRS)
(7) Preparing for the next fiscal period

Preparing for the Next Fiscal Period

New fiscal period is just like New Year. It’s a fresh new start for some things that you wanted to accomplish in the last fiscal period, but just didn’t happen. Whatever they are, this is your new chance.

Things to Do during the Next Fiscal Period:

a) Consistency in record keeping
b) Reconciliation of prior year’s amounts
c) Meeting company’s obligation to governing agencies and others
d) Interim financial statements reporting
e) Managers finding better ways of reaching goals and objectives

Seattle Washington, USA (click link)
Consistency in Record Keeping

There should be a consistency in business record keeping. It is required by law, for fair presentation of financial statements, and in accordance with generally accepted accounting principles (GAAP).

To start the new accounting cycle, last year’s financial records will be used as the opening balances, except for income and expenses amounts. Last year’s Income and Expense amounts which have been brought down to zero balances, and closed Income Summary to Retained Earnings will be applied. Closing last year’s books is a way of separating accounting business activities for each year. Balance Sheet accounts are considered as permanent accounts, so there will be no closing entries required during end of fiscal period, ending balances will be the opening balances for the new fiscal period.

Seattle Washington, USA (click link) 
Reconciliation of Prior Year’s Amounts

Reversing entries for certain adjusting entries performed during end of prior period are reversed on the first day of the accounting period, except for depreciation, bad debts and other estimated amounts adjusting entries. Though reversing entries process is considered optional by most accountants, however reversing entries are applied for the sake of simplification of subsequent transactions, as if adjusting entries were not recorded in the prior year.  This method is more like a bookkeeping mechanics than an accounting’s concepts, principles, and more on accrual than cash method basis of accounting.

Year-end book and bank reconciliation should be performed, making sure that all deposits in transit, outstanding cheques, and bank charges are accounted in prior year are matched and reflected in the financial statements. In addition, all prior period accounting errors and adjustments are accounted as well. Depending on each transaction, they are either added back/deducted in the beginning balance of the current fiscal period’s Statement of Retained Earnings, to correct/adjust balance presented in the current Balance Sheet of the company.
Downtown Seattle Washington, USA (click link)
Meeting Company’s Obligation to Governing Agencies and Others

Just like in our personal life, we have to make sure that we have the necessities to perform our daily activities. The same thing with business, it has to make sure that it pays its rent or lease (if it doesn’t owned its business place). Also, the company has to have licences to operate the business, thus the company has to renew its business licence and insurance, renew incorporation certificate, vehicle licence and insurance, pays its utilities, and other related due accounts.

Also, making sure that the company files its income tax related to the business, as an owner, partner, or shareholder, as a partnership (if needs to file) or corporation itself. Please refer for more detailed information in dealing with tax authority in my last article, part 6 of 7.

Downtown Seattle Washington, USA (click link) 

Interim Financial Statements Reporting

Besides the usual gathering of raw data, like monthly bank reconciliation, and recording of other business related transactions, management will always have to find ways of improving the performance of the company. Financial statements serve as indicators of company’s performance, an end product of the bookkeeping cycle, and applicable laws applied during the preparation. Sometimes management will use external auditors too, for additional credibility to financial statements presented.

Management will likely use the most recent financial statements or have an interim financial statements generated each month or every quarter for decision-making purposes. Interim Financial Statements are more for internal use and for specified parties only, not all phases of accounting cycle are performed, thus adjusting entries, closing entries, and post closing entries trial balance are not included. 
USA/Canada Border Crossing, Blaine Washington (click link)
Managers Finding Better Ways of Reaching Goals and Objectives

Each business is different, thus it is important for managers to make decision according to company’s goals and objectives. Usually managers’ performance on their day-to-day operation of the business is reflected on financial statements presented. Financial statements are usually influenced by users’ requirements, preparer’s role and intentions, complexity of business, and the company’s needs of funds. Thus, managers should consider accounting policies that fit for the company’s situation. They should be able to find ways of solving issues through the ability of evaluating the situation and applied appropriate solution.

Managers should always focus on objectives, facts and constraints for every situation. They have to be able to interpret the financial statements properly, as to the preparer’s criteria used, materiality level placed on each transaction recorded, and to use it appropriately in the decision process. Also, there should be consistency on criteria and policies applied in order to established credibility on the financial statements.

USA/Canada Border, Blaine Washington (click link) 
Furthermore, managers should find ways of designing a system how to deal in times of inflation and price changes, which historical data and the accrual method might not be the best basis for decision making for financial statement users. It is important for managers to see the true picture of its financial statements, especially for non-cash items. They should be able to find alternatives and apply measurement that make sense and address the issue.

Managers should monitor items in the balance sheets that are susceptible to fast deflation, like long-term assets such as fixed cost, investments in stocks, and derivatives (financial instruments). Also, keep an eye on your stocks and bonds for dilution and higher interest on long-term liabilities. Though owners enjoy the tax deductibility of interest on borrowed funds for investment, but for how long you can pay these higher interests. Market risk can definitely affect your business, especially when it becomes larger, thus extra monitoring is crucial.

USA/Canada, Blaine Washington, USA (click link) 
Also, managers should be able to monitor profits generated and the liquidity of the assets acquired. They have to make sure that before directors can declare dividends to shareholder or owners can withdraw funds, that funds are coming from company’s earnings and not from owners’ investments. This is to ensure the long-term existence of the company. Thus, application of certain ratios are encouraged as to profitability, liquidity, activity and coverage ratios of the company’s financial statements amounts, especially ratio analysis such as return on investments, debt-to-equity ratio, and so on. 

In times you might expand your business and have subsidiaries. As a parent company, though overall you have healthy net income showing on your consolidated financial statements, but keep an eye on subsidiaries that are losing money and deal with them separate for improvement. Likewise, in some cases, your income statement might be showing a net loss because of a huge amount of depreciation or/and losses related to your fixed and related assists. Keep an eye on the difference between costs vs. expenses that affect your net income.
USA/Canada Border Crossing, Blaine Washington (click link)
Running a business can be so exciting if you have the know-how-to-survive-and-succeed kit. A good manager can easily detect problems, prioritize their importance to the organization, always finds effective solution or best alternatives in solving the problems.  They are always able to provide answers to questions such as: Is the company bringing enough funds to meet its obligation? Is the company making healthy profits? Are the shareholders satisfied with their returns on their investment? At what level does the company credit rating is? Is there any room for improvement and expansion?

Most managers are problem solvers, but there will be times when they get burn out and lost their motivation. Therefore, directors should be able to step in this situation, encouraged and inspired managers and all staff working under them to always think the best for the company. The company might be able to generate additional income through expansion of the business, produce and sell other related products, hiring more people for support. Always remember, good people are assets to your company. Try to help and support them when they need you. So, if the business is doing well, probably an increased in wages, or provision of added benefits, like bonus plan, stock options, or other incentives on productivity are not too much to ask. They are definitely a few of driven factors in the retention of staff, long-term existence and profitability of the company.

Vancouver, British Columbia, Canada (click link) 
I hope all the “7 Basic Things You Need To Know During Start-up Year” have been helpful to you, either you are just thinking to start your own business, or even for current businesses that just need some extra pointers.

Hope you like browsing the inserted pictures. They came from the 1000s of photos I collected. Also, make sure to "click" all the "caption/wordings" at the bottom of each picture (you'll be surprised where they are linked to!:) They are not related to the topic of this post (of course). I thought it would be nice to insert them, just to give you a break while reading this post. Until then.

Please feel free to leave comments/inquiries or you may contact me at:
Earla RiopelBSCom(USA), DipAcc(UBC)
Main Sites:  Website Twitter ; LinkedIn ; Facebook Blog


Filing your Business Income (US) Tax Return After Fiscal Year

Writing these mini-parts of “7 Basic Things You Need To Know During Start-up Year” has been exciting for me. I hope you find the last 5 parts helpful for your new business adventure, or even for those businesses that are already in existence and still finding ways of improvement.

Again, here’s the complete list of “7 Basic Things You Need To Know During Start-up Year”:

7 Basic Things You Need To Know During Start-up Year:

(1) Types of Business Organizations
(2) Choosing Business Products or/and Services
(3) How to keep business records
Hiring Employees or/and Contractors
(5) Year-end requirements
(6) Dealing with the tax authority (IRS)
(7) Preparing for the next fiscal period
In the last issue I wrote about year-end requirements. At this time of the year, income and expenses for the tax year being reported should have been included and presented in the financial statements. Now it’s time for the company to get ready all information for Internal Revenue Services, or other governing tax agencies (for other countries).

Each country has its own policies and procedures on their filing requirements. Most of these requirements are somewhat similar and applicable to all taxpayers worldwide. Preparing your business income tax filing requirements is mainly based on the type of business organizations you have. I wrote about types of business organizations during the first issue, and again here they are: (1) sole proprietorship, (2) partnership and (3) corporation. These 3 types are taxed according to their business formation.
Seattle Sounders and Manchester United Fans (click link)
Sole Proprietorship
An owner of a sole proprietorship will be reporting his or her business activities through inclusion to their Form 1040 – Individuals tax return. A sole proprietor will use a calendar year end (December 31st) of reporting of income and expenses, using the accrual method or cash method. Accrual method of accounting is described as recording of income when earned and expenses when incurred during the 12-months business operation activities, whereas, cash method income is reported upon received of amount and record expenses when they are paid.

The company’s Income Statement accounts will be reconciled for reporting of income for tax purposes. Not all income and expenses stated in the company’s Income Statement are included as income and allowable deductions, thus reconciliation is required. A completed Schedule C for Business or loss is attached to Form 1040. Other non-business income or loss such as capital gains or loss, other taxable income or deductible losses should be included too. Check if you need other forms like, Schedule D (Capital Gains or Loss); Form 4797 (Other gains or losses); and Schedule E (Partnerships, S corporation, estates, trusts, rents, royalties, etc) for your Form 1040.

As a sole proprietor tax filer, you can deduct 50% of Self-employment Tax paid for the taxation year. Also, 100% of the Premiums for Medical Insurance paid for the tax filer, spouse, and dependents are deductible in calculating your Adjusted Gross Income (AGI).

Filing deadline for self-employed is April 15th of each year. If extension of filing of Form 1040 is required, a four-month filing extension is automatically granted upon filing of Form 4668 by the due date. Any estimated tax payable must be paid during April 15th to avoid penalties.
During Half-time, Manchester United vs. Sounders FC 2011 Game (click link)

Partnership taxable income is reported as a “flow through” self-employment income to each partner of the business. Partnership does not pay income tax on itself. However, a Partnership Information Return, Form 1065 is required, which include each partner’s share of partnership income or loss, and other related taxable/deductible items on each partner’s individual’s return (Form 1040). A Schedule K and a Schedule K-1 for each partner are included with the Form 1065 upon partnership return filing.

Like sole proprietorship, partnership’s Income Statement accounts will be reconciled for reporting of net income for tax purposes. A completed Schedule E will be attached to each partner’s Form 1040, with related information of partners’ share of income. Each partner’s share of net business income will be added onto individual taxpayer’s Form 1040 Income.

Filing deadline for reporting of partnership taxable income is the same as required for sole proprietorship, April 15th of each year. In addition, all balance amount owing must be paid on April 15th, or else penalty charges will be charged for late payment, even if Form 4668 (4 months automatic extension) is filed at due date.
During Half-time, Manchester United vs. Sounders FC 2011 Game (click link)
As previously mention, in the US, there are two types of corporation, the C corporation and the S corporation (elected as small corporation). C corporation’s taxable income is reported by the corporation itself (Form 1120), and reported by shareholders onto their Individual (Form 1040) Income tax return upon dividends received from corporation during the year. Thus, corporation taxable income is being taxed into two levels: C corporation and shareholders, and double taxation happened.
Whereas, S corporation pays no income taxes (except on built-in gain in excess or net passive income). S corporation‘s income and allowable deductions are pass-through to a tax-exempt shareholder as unrelated business income (UBI), treated like income from a partnership entity. Also, S corporation’s income/expenses and related items are adjusted to shareholders debts and equity. Thus, S corporation has the intention not to generate earnings and profits. Any distribution by S corporation to its shareholder is accounted by the S corporation and its shareholder according to sources of income. For example, S corporation net income during calendar year was distributed to shareholder during the year. This distributed income is includable income to shareholder’s Form 1040. Also, any dividends received from a C corporation and distributed to shareholder during the year is includable as dividend income to shareholder’s Form 1040. Lastly, if the distributed funds came from shareholder’s stock’s basis (equity), the funds are considered non-taxable since it’s a return of capital to S corporation’s shareholder.
Basically, besides having a limited liability obligation to shareholders, considered as a separate entity, having unlimited life of existence and easy transferability of ownership, both C corporation and S corporation have other advantages, like the payment of taxes. Depending on shareholders’ status, location, where they file their Form 1040, both corporation and shareholders can enjoy: (1) Tax Reduction (2) Tax Deferral and (3) Income Splitting privileges.

Tax reduction is enjoyed by shareholders who have higher individual tax rate. Having a corporation, shareholders can enjoy deductions only allowable for a corporation. However, allowable deductions for individuals and corporation don’t have much difference, except items related to AGI (for individuals), charitable deduction, dividends received deduction (DRD), certain types of losses, organization expenses, and other related items. Also, Alternative Minimum Tax (AMT) for small business corporations controlled by US shareholders is available for small corporation, depending on threshold gross receipts of the corporation and other related requirement.
Tax deferral is a strategy applied by corporation in minimizing tax payments, and related to the double taxation of the C corporation’s income. The earnings are left in the C corporation instead of paying shareholders right away. It depends on retained earnings that C corporation is planning in keeping, and shareholder’s individual income tax rate, tax payment is deferred on earnings in the C corporation for lower corporate tax payment. Thus, timing of the declaration of dividends to shareholders by the C corporation is implemented.

Income Splitting is commonly used for corporations owned by family members as shareholders. Earnings are spread out and paid as dividends to family members who have lower individual income tax rates, available deductions and credits for individual taxpayers.
What a game that was! (click link)
C corporation must file Form 1120 tax return. Income Statements will be reconciled for tax purposes, and some items will be added back and deducted upon reconciliation process. Schedule M-1 of Form 1120 reconciles permanent difference (non-taxable/non-deductible) and temporary differences (items reflected on different periods).  In addition, Schedule M-2 of form 1120 reconciles the Retained Earnings.
Both C corporation (Form 1120) and S corporation (Form 1120S) must be filed by the 15th of the third month upon company’s year end. An automatic 6-months extension may be available upon filing Form 7004, however, estimated taxes liability for C corporation and S corporation’s built-in gains tax in excess of net passive income tax, payable on due date (15th of third month of fiscal year end).
Depending on the complexity of your individual or/and business-related tax returns, as previously mentioned, hiring a good accountant, even once a year to go over your books, not only it will give you peace of mind, but probably even save you money for business tax payments that you shouldn’t be paying in the first place. A good accountant is trained to advise, and recommend especially on year-end preparation of financial statements. An accountant can give you advices on proper accounting of income which are taxable, or deduction which are deductible.
In addition, an accountant can help you with other business transactions like preparing your income tax returns, either your individual or/and corporate return. An accountant is trained to analyze taxable or non-taxable income, deferrable income, non-inclusion of allowable expense deduction, or deferral for lower tax payments during taxation year being reported. Thus, accountant can help you with your tax filing and even with your auditing requirement as well.
Should you decide to do your own individual or/and corporate income tax return(s), please do decide wisely. Do a little research what is best for you and your business. There are few good tax preparation tools you can use, either using paper forms or electronic filing online using tax software with the Internal Revenue Service (IRS).
Note: The continuation of this topic, “7 Basic Things You Need To Know During Start-up Year of Business?” will be continued on the next post, “Part 7 of 7: Preparing Your Business for the Next Fiscal Period".
Hope you like browsing the inserted pictures. They came from the 1000s of photos I collected. Also, make sure to "click" all the "caption/wordings" at the bottom of each picture (you'll be surprised where they are linked to!:) They are not related to the topic of this post (of course). I thought it would be nice to insert them, just to give you a break while reading this post. Until then.
Please feel free to leave comments/inquiries or you may contact me at:
Earla RiopelBSCom(USA), DipAcc(UBC)
Main Sites:  Website Twitter ; LinkedIn ; Facebook Blog


Things to do at Business Year-end

Seattle Sounders FC Game was about to start, Qwest Field (click link)

I hope you have enjoyed reading the last 4 issues of the “7 Basic Things You Need To Know During Start-up Year” as much I enjoyed writing them. Again, here's the complete list:

7 Basic Things You Need To Know During Start-up Year:

(1) Types of Business Organizations
(2) Choosing Business Products or/and Services
(3) How to keep business records
Hiring Employees or/and Contractors
(5) Year-end requirements
(6) Dealing with the tax authority (IRS)
(7) Preparing for the next fiscal period
This time I will be writing about “Year-end Requirements”. I would say, for some it’s the most exciting part of the business. Why is that? This is when the company finds out if it makes profit (or loss) during the fiscal period reported.

5 Things to Do at Year-end

a) Preparation of Year-end Financial Statements and Closing of Books
b) Management’s Reports
c) Reviewer or Auditor’s Report
d) Preparation of Annual Report
e) Annual General Meeting (AGM)

Preparation of Year-end Financial Statements and Closing of Books

In Part one (1) I wrote about the 3 types of Business Organizations: (1) Sole Proprietorship, (2) Partnership and (3) Corporation. All 3 are required to keep business records (see Part 3), so at the end of the year the company can have a better picture regarding its business activities throughout the entire year in form of financial statements. These statements are used as tools for decision making, for further improvement, either it’s for expansion or seeking additional investments or financing. Usually financial statements include, Income Statement, Statement of Retained Earnings, Balance Sheet, and Statement of Cash Flow or Statement of Changes in Financial Position (if required).

Preparation of year-end financial statements becomes easier if the company has done most of the regular bookkeeping/data entries throughout the fiscal period. So by the end of the year, all it needs is to do a few steps and that includes the preparation of the year-end financial statements. For some who have chosen not to use accounting software, and decided to prepare their financial statements from scratch (manual accounting system), there are a few steps before financial statements are prepared, called the Phases of Accounting Cycle. These phases can be group into two: (1) Prepared throughout the year and (2) Prepared during the end of year.

Throughout the year includes collection of raw data, and related business information transactions and events happened. This information is analyzed and recorded for journalizing. These journal entries (JE) are then posted to each general ledger (GL) accounts.

At the end of the year, unadjusted trial balance (TB) for each GL account is listed. Then adjusting entries are performed for accurate, unbiased, and reliable presentation of amounts in the financial statements. Adjusting entries are usually performed for few accounts like accrued income and expenses; depreciation of fixed/tangible or intangible assets, bad debts expense, supplies used, and prepaid expenses. For example, accounts which are affected by more than one fiscal period such as: interest expense for long-term liability, rent expense for lease paid for more than a year, tax expense incurred for the current year but not yet paid. Also, insurance expense paid for more than one year, wages accounted and still owing at the end of fiscal period. Lastly, overstatement or/and understatement of amounts are also done during adjusting entries before preparation of year-end financial statements are performed.

Once adjusting entries are recorded on the Journal and posted on the General Ledger, Financial Statements are prepared from the adjusted accounts. After the financial statements have been prepared, then closing entries can be done to close the books.

Closing of books is performed by transferring the income and expenses balances to Income Summary, which closed to Owner or Partners’ Investment (for sole proprietorship and partnership) or Retained Earnings (for corporation). After posting, only the Balance Sheet accounts will show up. There would be no income and expenses balances from Income Statement that will show. The income and expense accounts will have zero balances, and being ready for the next fiscal period. Only current Balance Sheet accounts will be carried forward for the next fiscal period.

Lastly, Post-Closing Trial Balance is performed. This is to check the debits and credits of the adjusting entries and closing entries, whether they are done properly, and reflected in the Balance Sheet amounts that will be carried forward for next fiscal period.
Manchester United vs. Seattle Sounders FC game, Qwest Field (click link)
Management Report

Though management report is not usually required for a one-person managed company, but it is advisable for a company that has a manager, who is usually responsible for the day-to-day managing of the business operation. Besides the financial statements presented, it is another useful tool for related parties for their decision-making as to the best interest of the company.

This report is the representation of the manager (s) of the company, usually signed by the highest position related to the management of the business. For bigger companies, management report is usually signed by a Chief Operating Officer, Chairman or President, Chief Operating Officer, Vice President, Chief Financial Officer, or just your only staff, your business manager of your business.

Management Report is usually based from the financial condition of the company. If they are bigger companies, management staff usually applied the Management Discussion and Analysis (MDA) method. MDA is a more detailed discussion of accounting principles used in the preparation of the Balance Sheet and Income Statement accounts, and if parent company has subsidiaries, these accounting principles are being applied for consolidated financial statements of the subsidiaries as well.

It will likely include the liquidity of its resources, recent accounting standards applied in the preparation of the financial statements. Also, it might include information related to investments and the market risk of exposure involvement associated, and information related to Securities Exchange Commission, like SEC new rules.

Basically, management report will include these items on their report:
- Management taking responsibility of the financial related information presented in the annual report.
- Management is responsible for the objectivity, reliability, integrity and consistency of information in the financial statements.
- Management is stating that the financial statement have been prepared in accordance of Generally Accepted Accounting Principles (GAAP) in US (or country being reported to, usually the parent company’s business is located).
- Management has exercised reasonable judgment and best estimate appropriate for the situation have been applied.
- Management responsibility on reliability of company accounting systems, related internal control to support procedures, and provide reasonable assurance of the financial statements.
- It will also include how the management safeguard the company assets, and staff accountability to the company as a whole.
- If applicable, it might include information regarding the role of the Audit Committee of the Board of Directors of the company, their responsibilities in the financial reporting, internal control systems and other related matters with the company’s internal auditor and external auditor.
- Basically, it is the management statement and representation of the company.
Manchester United vs. Sounders FC Game (click link)
Compilation, Review or Auditor’s Report (If required)

Your company might not need a professional accountant to audit, review or compile your financial statements. However, for some companies which are seeking loans and possible investments, most prospective creditors and investors preferred to have an audited, reviewed, or compiled financial statements.

Out of the 3 reports (Compilation, Review and Auditor’s report) the auditor’s report has the highest reasonable assurance, then review, and then compilation. These types of reports, especially auditor’s report, just give extra credibility to the company’s financial statements on top of good accounting systems used in the preparation of these financial statements.

Companies on stock markets are required to have audited financial statements (it can be consolidated with parent’s subsidiaries’ financial statements) by their investors, and governing agencies like the Securities Exchange Commission (SEC).

An auditor can give a company’s financial statements a reasonable assurance that the financial statements being presented are appropriately recorded based on specified criteria and truly reflect the transactions and events happened during the fiscal period.

Sounders FC just before the game with Manchester United (click link)
Preparation of Annual Report

The annual report is the most anticipated report by all parties concerned. Why is that? It is the report that contains information (not just the set of financial statements) occurred during the fiscal year. It is sort of a special newsletter by the management to their shareholders or/and other concerned parties (creditors or prospective investors) related to the annual operation activities of the company. Annual report will likely include:
- Opening letter addressed to Shareholders, or Members, or related parties
- Highlights of the financial and operating activities during the year.
- Management Discussion Analysis (MDA) of financial and operating activities of the company
- Management Report
- Auditor, Review or Compilation (if required)
- List of Financial Statements (Income Statements, Balance Sheet, and Statement of Changes in Financial Position (or Statement of Cash Flows)
- Notes to Financial Statements will likely include items such as: type and description of the business, reorganization (not applicable on new start-up business), IPO information (if applicable), significant accounting estimates, new acquisitions, receivables and payables important information, financing, net capital requirement, stock options (if any), employees’ benefit plans (if any) , income taxes information, off-Balance Sheet items and credit risk, fair value of investments like financial instruments, and probably will include related party transactions (if any).
- It will likely include owners/shareholders/investors, board of directors, officers information as well

Please note that above listed items for compiling an Annual Report are not applicable to all companies, especially in a sole proprietorship and partnership types of business organization. Just pick the items that applied to your company accordingly.
Just before the kick-off, Manchester United vs. Seattle Sounders FC (click link)
Annual General Meeting (AGM)

AGM can have mixed feelings to all parties involved. But whatever result you are expecting, hopefully it is the best for yourself and most all for the entire company. Tension in an AGM is just normal, especially if it involves voting and re-electing of Board of Directors by shareholders, and appointing of officers by the Board of Directors. It’s not all that nerve racking though, since part of the AGM is the presentation of the company’s annual report. As mentioned previously, this report gives all related parties information on how the company’s performed during the fiscal period reported. Also during the AGM, some companies will pick this time of the year to do their giving of awards to those who went beyond their call of duties.

I always think AGM is a good way of starting fresh. People involved have another chance of proving themselves (if they didn’t fully accomplish everything in the last fiscal period). It is another chance to do their best for the company, and working with the best people, who have the same common goal, making healthy profits and at the same time serving the community.


Note: The continuation of this topic, “7 Basic Things You Need To Know During Start-up Year of Business” will be continued on the next post, “Part 6 of 7: Filing your Income Tax Return After the Fiscal Year."

Hope you like browsing the inserted pictures. They came from the 1000s of photos I collected. Also, make sure to "click" all the "caption/wordings" at the bottom of each picture (you'll be surprised where they are linked to!:) They are not related to the topic of this post (of course). I thought it would be nice to insert them, just to give you a break while reading this post. Until then.
Please feel free to leave a comment or you may contact me at:
Earla RiopelBSCom(USA), DipAcc(UBC)
Main Sites:  Website Twitter ; LinkedIn ; Facebook Blogg