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Demystifying Accounting - A MaRS Presentation
Demystifying Accounting - A MaRS Presentation
Demystifying Accounting - A MaRS Presentation
Demystifying Accounting - A MaRS Presentation
Demystifying Accounting - A MaRS Presentation
Demystifying Accounting - A MaRS Presentation
Demystifying Accounting - A MaRS Presentation
Demystifying Accounting - A MaRS Presentation
Demystifying Accounting - A MaRS Presentation
Demystifying Accounting - A MaRS Presentation
Demystifying Accounting - A MaRS Presentation
Demystifying Accounting - A MaRS Presentation
Demystifying Accounting - A MaRS Presentation
Demystifying Accounting - A MaRS Presentation
Demystifying Accounting - A MaRS Presentation
Demystifying Accounting - A MaRS Presentation
Demystifying Accounting - A MaRS Presentation
Demystifying Accounting - A MaRS Presentation
Demystifying Accounting - A MaRS Presentation
Demystifying Accounting - A MaRS Presentation
Demystifying Accounting - A MaRS Presentation
Demystifying Accounting - A MaRS Presentation
Demystifying Accounting - A MaRS Presentation
Demystifying Accounting - A MaRS Presentation
Demystifying Accounting - A MaRS Presentation
Demystifying Accounting - A MaRS Presentation
Demystifying Accounting - A MaRS Presentation
Demystifying Accounting - A MaRS Presentation
Demystifying Accounting - A MaRS Presentation
Demystifying Accounting - A MaRS Presentation
Demystifying Accounting - A MaRS Presentation
Demystifying Accounting - A MaRS Presentation
Demystifying Accounting - A MaRS Presentation
Demystifying Accounting - A MaRS Presentation
Demystifying Accounting - A MaRS Presentation
Demystifying Accounting - A MaRS Presentation
Demystifying Accounting - A MaRS Presentation
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Demystifying Accounting - A MaRS Presentation

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To watch our video coverage now, visit: http://www.welchllp.com/resource-centre/videos/events/ …

To watch our video coverage now, visit: http://www.welchllp.com/resource-centre/videos/events/

This year, Welch LLP & MaRS partnered up to give a three-hour workshop/presentation dedicated to demystifying the principles of accountancy – specifically designed for start-ups! Managing your cash flow, understanding financial statements and choosing your accounting software are just some of the subjects addressed.

Published in: Business, Economy & Finance
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  • Can you get the 2 bullets to fly in separately
  • Fly in each of the things to consider
  • Transcript

    • 1. DEMYSTIFYING ACCOUNTING A MaRS Presentation
    • 2. What we will cover today… • Key Terms (30 min) • Bookkeeping & Financial Statements (55min) • Break (15 min) • Cash Flows Strategy & Maintaining (30 min) • How & When to engage an accountant (20 min) • Questions (30 min)
    • 3. Key Terms – “Pop Quiz”
    • 4. Bookkeeping + - ACCRUAL LEDGER
    • 5. What is Bookkeeping? 1. Gathering the source documents 2. Entering information from the source documents into journals & accounts 3. Performing end of period procedures 4. Closing the books for that period
    • 6. Goals of good bookkeeping • Understandable data, cross referenced & easy access to supporting documents for: o internal analysis and review purposes o support for possible audits o Support for financing and investment sources
    • 7. Bookkeeping Software • Wave Accounting • Sage 50 Accounting (formerly Simply Accounting) • • • • QuickBooks QuickBooks online Freshbooks Sage 300 (formerly Accpac) • …
    • 8. “Bookkeeping in the Cloud” There are pro’s and con’s and you need to consider your company’s unique situation and risk appetite!
    • 9. Bookkeeping VS. Accounting • Bookkeeping is record keeping/ data entry. • Accounting is can include bookkeeping, but also infers tasks such as preparing financial statements from the bookkeeping records, tax planning, advisory and assurance work.
    • 10. Financial Statements NOTES TO THE FINANCIAL STATEMENTS ANNUAL FINANCIAL STATEMENTS IFRS
    • 11. Financial Statements Financial Statements are a tool to analyze your company’s performance.
    • 12. FS – Internal VS. External o Internal reporting is flexible and you can create reports in the format that best suits your needs. They can be weekly, monthly, quarterly or annually o External reporting is more structured and there are rules that govern their preparation and presentation, to increase the comparability between companies.
    • 13. FS – External • External users may include CRA, bank/ other lenders, investors, potential lenders/ investors… • They tend to be annually although may also be quarterly (required quarterly for public companies). • You might have an external accountant or auditor report on the statements (usually only for the annual statements). • You have to choose one set of accounting standards (ASPE, IFRS, Accrual/ tax basis).
    • 14. FS - Components • Financial statements always include: – A balance sheet – An income statement and statement of retained earnings. • But can also include: o A statement of cash flows, o A report on the statements (by external accountant) o Notes to the financial statements.
    • 15. Balance Sheet Critical “what do we have” statement. Assets = Liabilities + Equity (hence “balance” sheet)
    • 16. Assets o Definition of ‘Asset’? • Generally intuitive • Assets can be valued at cost or at FMV and GAAP provides rules as to which value can be used and when. This is one of your Accounting Policy Choices.
    • 17. Liability o Definition of ‘Liability’? • Also generally instinctive • Like assets, what is considered a liability by GAAP is generally the same as what you would instinctively consider a liability.
    • 18. GAAP based variances o Certain items may have value to you, but you may not be allowed to record them as an asset. o Intangible assets are an example of this. They must meet the following criteria in order to be recorded as an asset. They must be o Identifiable, o The company must control them, and o There must be a future economic benefit. Is it Eligible? Patent Workforce Know-how -
    • 19. GAAP based variances o A finance lease is another good example of a GAAP based variance. o Here although there is no obligation to pay the balance of the lease currently, o The underlying reality of the finance lease arrangement is that you have purchased the asset and the seller is financing the purchase. o Therefore GAAP requires you to record the asset & liability at the present value of the minimum lease payments.
    • 20. Equity • What is equity? o Capital stock o Retained earnings o Other
    • 21. Income Statement • The “what did we do” statement. o Income – expenses = net income. o Some different presentations possibilities
    • 22. Retained Earnings • Sometimes this statement is part of the Income Statement, • Sometimes it is an entirely separate statement (for IFRS it is required to be separate). • The closing retained earnings is a cumulative tally of all previous years’ income, less any dividends paid out of the earnings and any adjustments, since the inception of the company – hence its name.
    • 23. Accountant’s Report • For general purpose Financial Statements an accountant can issue: – An Independent auditor’s report, – A review engagement report, or – A notice to reader. • The report will state the accounting standards applied (IFRS/ ASPE/ accrual/ cash…) • The report will also state any qualifications & what they mean.
    • 24. Financial Statements: Notes • Purpose: o To give background & added disclosure which is not required (or would be too cumbersome) in the statements themselves. The notes are a required part of GAAP. o This includes disclose the accounting policies, Related Party Transactions and their impact, loans payable details, capital assets, income taxes, capital stock, commitments… o Without the notes, there can be a great amount of interpretation to some the details. The notes help to provide context to increase comparability between one set of financial statements and another.
    • 25. Break – 15 min
    • 26. Cash Flows Strategy & Maintenance Demands for cash means you need to plan & manage it to a high degree to make it effective. o Too much cash is a waste as you will not be earning anything with it and could be earning if it is invested. o Too little cash and you won’t be able to pay your bills as they come due and will incur interest and penalties. o Consider maintaining rolling cash flow projection
    • 27. Cash Flows Strategy & Maintenance What do these statements tell you for budgeting and cash flow management purposes? • Cash flow statement • Balance sheet
    • 28. Prioritizing Cash Flows Step 1: Set out a hierarchy of payment streams. Items to consider: o Interest rates o Penalties for late payments o Any borrowing covenants
    • 29. Prioritizing Cash Flows Step 2: Review the payment terms: o If there is a discount period, consider if it is worth taking advantage of. o If not, consider the payment period and plan when you are going to pay (i.e. at the end of the period).
    • 30. Prioritizing Cash Flows Step 3: Consider other non-monetary factors
    • 31. Weekly Rolling Cash Flow Template o 45 days; 60 days; 90 days o Update weekly (Monday morning?) o Excellent Management Tool; Reflects the best guess of actual cash available o Shows you when a “cash crunch” is coming
    • 32. Accountants: How & When to Engage Who is your accountant to you? o A service provider or o A strategic partner
    • 33. A Few Notes of Caution… The old adage: a penny wise pound foolish. • Some tax planning may not be possible if you wait too long or it may be significantly more costly to restructure. o QSBC (Qualifying Small Business Corporation) – sale of business – up to 200K in tax savings, but some of the steps need to be in place 2 years in advance! o Holding corporation and share structure that is beneficial to you as well as your investors.
    • 34. A Few Notes of Caution… Be clear what role you want your accountant to play. • It can be beneficial to have someone who can grow with you and becomes a key partner in your business.
    • 35. A Few Notes of Caution… You don’t know what you don’t know. o GST/ HST – If I make a sale to someone in Manitoba what rate do I charge? o GST/ HST – Am I eligible for the quick method? • Generally a fair bit of savings if you do, but only if you elect ahead of time. o Tax credits – SRED (Scientific Research & Experimental Development), ODMTC (Ontario Digital Media Tax Credits), Apprenticeship Tax Credits, …
    • 36. Video http://www.youtube.com/watch?v=UfzUB85ms-s
    • 37. Questions?

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