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The Minute Book is basically a record of the most important rules and decisions of the company.  It dictates whom holds what significant position within the company, what those people are allowed to do as well as what and often when they can do it.  Often it proves whom is, or isn’t a shareholder.  There are other legal aspects that are also important within the Minute Book which a lawyer could talk to.

From an accountants perspective, the Minute Book is significant for the following reasons:

  • If no director or officer appointed within the Minute Book then only the named first director from the Articles of Incorporation can sign anything for the company. This includes contracts, bank agreements, the balance sheet and the tax return;
  • If no shares issued per the Minutes of the Corporation, then it is impossible to pay dividends, meaning all such payments are really net payroll (*);
  • If the Minutes do not authorize a payment of dividends, then again they are considered to actually be net payroll (*);
  • Without an audit waiver exemption, signed by all shareholders, then the company MUST have an audit, it cannot have a review nor compilation done, that is per the Corporations Act (both Federal and Ontario agree on this point).  An audit costs significantly more than a compilation, which is all that most small business generally need; and
  • Often the first thing the Canada Revenue Agency looks for when they come to do a tax audit of a company is the Minute Book.

(*) If something is ‘reclassified’ by the Canada Revenue Agency to be ‘net payroll’, the tax, penalties and interest that can be charged to both the company and the receiver of the payment can often be more than double the actual tax owing, so this is something that is very negative and should be avoided wherever possible.

As an accountant, I cannot update the Minute Books for you, that would be providing legal services.  Also as an accountant,  I cannot complete my work (like preparing financial statements and tax returns) without first knowing the Minute Book is up to date and in order.

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Sometimes changes made by the government are easy to manage and require very little adjustments to your financial management, but then there are some changes that can be very confusing.  Many businesses would say that having to change the way to manage the penny is not a significant issue, but you should be very clear about the dos and don’ts

When taking cash, you need to round up or down – When you are excepting cash from the customer you will need to either round up or down to the nearest 5 cents.  If you are selling a product that costs $43.16, you would round that down to $43.15.

What about Credit cards, cheques, and debit – This can be left at exact change.  Since there is no exchange of the pennies, then you can leave the transaction as is.

Businesses have the option of how they want to manage the handling of the penny.  Businesses have a choice of making change in pennies until the supply runs out, or rounding out the final amount (or equivalently the change owed) of any cash payment to the nearest five-cent increment.

The last penny was minted May 4, 2012 in Winnipeg. Some six billion pennies are expected to be surrendered by Canadians over the next six years, and melted down and recycled by the Royal Canadian Mint.

These changes to the handling of the penny will result in adjustments to your financial statements and cash flow.  Depending on the volume of transactions this could actually be a significant influence on your financial performance.  Proper managing and recording of this will be important for businesses.  Numbers Plus Ltd is a small business accountant servicing Mississauga, Oakville, Milton, Toronto, Brampton and other areas inside and around the GTA that can help with your financial statement needs.  Contact us today to discuss your needs.

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