Assets: These are the assets that an organization owns. Thus, assets can be tangible, such as a piece of machinery, or intangible, such as a patent. They are separated into two categories on the balance sheet: short-term assets (current assets) and long-term assets. Short-term assets generally consist of cash, accounts receivable, prepaid expenses, and inventory. These items represent the positive portion of the company's working capital. They are also items that can be converted into cash to operate the business. Long-term assets consist of equipment, vehicles, buildings, and other assets of the company that can generate value beyond one year.

Balance Sheet: In financial statements, the balance sheet shows the assets, liabilities, and equity of the company at a specific point in time, usually the day the company's financial year ends. The balance sheet is therefore a "snapshot" at a specific date. The balance sheet thus allows us to understand what the company owns, what it owes, and how much money has been invested by shareholders. In short: assets = liabilities + equity.

Net Profit: It represents the company’s profit or net profitability. It is therefore the very reason why a company does business. When net profit is expressed as a percentage of revenue, it helps to understand how each dollar earned turns into profit.

Budget: It is a management accounting tool to plan the future based on the organization's historical data. It is often presented monthly and in comparison to actual data. It is a representation in the future of the income statement. Obviously, there is never a budget certified by a CPA since it is a predictive tool.

Cash budget: Also commonly called “cash flow” or “cash budget”, it is often developed over a short period (monthly or weekly). It allows you to highlight the organization’s actual receipts and disbursements. This tool allows you to confirm whether the company can meet its financial obligations or to determine the amount of operating credit margin required. It is an essential tool for forecasting your cash flow needs!

Equity: This is the net worth of the company and shows how much the owners and shareholders have invested over time. It includes common and preferred shares as well as retained earnings, which are the earnings kept each year. It is interesting to compare what the shareholders and creditors hold to understand the financial stability of the company.

Accounting: This is the system for organizing a company's financial data. There are a set of standards that must be followed in order to reproduce comparable and representative data. Accrual accounting is the generally accepted accounting method in Canada. Unlike cash accounting, which is based on cash outflows and inflows, accrual accounting recognizes revenues when invoicing and expenses when the good or service is received.

Financial Statements: This is a report that includes the balance sheet, income statement, statement of changes in financial position and notes. It is the company's report card that allows you to see its progress and compare yourself to other companies by demonstrating the current financial situation of the organization. International Financial Reporting Standards (IFRS) must be used to prepare the financial statements of all companies listed on the stock exchange in Canada, while private companies can adopt them or use Accounting Standards for Private Enterprises (ASPE).

Income Statement: Part of the financial statements, the income statement shows the company's sales and expenses, demonstrating its profitability over a period of one year in general. Normally, for a good reading, the following separate items should appear: sales, cost of sales, gross profit margin, expenses (administrative, sales and financial) and net profit.

Gross profit margin: This is the excess of sales over the cost of products or services sold. The terms "gross margin", "gross profit margin" or "gross margin" are also used. This profit is used to cover indirect costs, such as administrative costs or financial costs of the company.

Liabilities: Liabilities are the amounts owed by the organization and are divided, like assets, into two categories: short-term liabilities and long-term liabilities. Short-term liabilities include, among others, the line of credit, accounts payable and the payment of debt due in the next year. These elements thus represent the negative part of the company's working capital and are therefore all due in the short term. Long-term liabilities consist mainly of the company's bank debt or amounts payable beyond 12 months.

If these concepts seem complex to you, it may be wise to call upon a CPA (Chartered Professional Accountant) to assist you in your efforts. He or she will not only be able to help you better structure your finances, but also provide you with strategic advice to promote the development of your business. To learn more about the many benefits of working with a CPA, consult the guide from the Ordre des CPA du Québec here.

The 20 Minutes CPA initiative offers practical and accessible resources to demystify accounting and its functions. These tools, intended for entrepreneurs and SME managers, will help you understand why accounting is a cornerstone of any business and how to use it optimally. To delve deeper into these concepts, explore their resources here and here .