Financial statements

Financial statements are a numerical snapshot of a business: documents that summarize what it owns, what it owes, and whether it has made a profit. The two main financial statements are the balance sheet (what a company owns and owes on a given date) and the income statement (revenue minus expenses over a period).

At a glance

The balance sheet: what the business owns, what it owes, and what remains for the owners once debts are paid
Income Statement: Revenue, Expenses, and Profit for a Given Period
Sometimes a cash flow statement: actual cash inflows and outflows
Required for corporate tax purposes (T2 returns at the federal level, CO-17 in Quebec) and to obtain a loan
Their reliability depends on up-to-date books: a rigorous monthly bank reconciliation prevents unpleasant surprises at the end of the year

Why it matters

Imagine trying to sell your car without ever having recorded its mileage or repair history: the buyer and the bank would have no basis for trusting you. Financial statements serve this same purpose for a business. The balance sheet answers “What is it worth?” and the income statement answers “Is it profitable?” A bank reviews them before granting a loan, and a buyer reviews them before making a purchase. Sloppy figures can cause you to miss out on financing or a sale, and their reliability depends on a Bank Reconciliation up to date; salaries paid, summarized at the end of the year in the T4 forms and RL-1 slips, are classified as expenses.

A concrete example: A company with $200,000 in revenue and $160,000 in expenses generates a profit of $40,000; at the 2026 small business tax rate (approximately 12.2% for federal and Quebec taxes combined), this amounts to nearly $4,880 in taxes, calculated based on these same financial statements filed with the T2 and CO-17 returns. The rules are detailed in Revenu Québec. Bankeo provides you, for free, with a vetted accountant or CPA who prepares them in accordance with industry standards, and we’re here to support you every step of the way.

Frequently asked questions

What exactly are they?

These are two or three tables that provide an overview of the business’s finances: what it owns and what it owes (the balance sheet), what it has earned and spent (the income statement), and sometimes where its money comes from and where it goes (the cash flow statement).

Who is required to prepare financial statements?

Every corporation (an “incorporated” business, meaning a company that is legally separate from its owner) prepares them annually for tax purposes. A self-employed individual is not required to do so, but preparing them still provides a clear picture that helps with managing the business and securing loans.

Do I need an accountant to prepare them?

For internal use, software may be sufficient. But for tax purposes, a bank, or an investor, it’s best to have financial statements prepared in accordance with standards. Bankeo provides you with a vetted accountant or CPA at no cost to you, and we’re here to support you even after that.