The words behind the numbers
30 terms from the counter, the ledger and the pay run, defined plainly with Canadian context and worked examples.
A
Accounts payable (A/P)
Accounts payable is the money a business owes its suppliers for goods and services it has received but not yet paid for, shown as a liability.
Accounts receivable (A/R)
Accounts receivable is the money customers owe a business for goods or services already delivered on credit, recorded as a current asset.
Accrual vs cash accounting
Accrual accounting records revenue and expenses when they are earned or incurred; cash accounting records them only when money changes hands.
C
Capital cost allowance (CCA)
Capital cost allowance is the Canadian tax deduction for the cost of depreciable assets, claimed yearly at set rates for each CRA asset class.
Chart of accounts
A chart of accounts is the organized list of every account a business posts transactions to, grouped into assets, liabilities, equity, revenue and expenses.
Cost of goods sold (COGS)
Cost of goods sold is the direct cost of the products a business sold in a period, including purchase price, freight and duties, but not overhead.
CPP and CPP2
CPP and CPP2 are Canada Pension Plan contributions deducted from pay and matched by the employer, CPP2 applying to earnings above the first ceiling.
E
Economic nexus
Economic nexus is a US state sales tax rule that requires out-of-state sellers to register and collect tax once their sales into the state pass a threshold.
Employment Insurance (EI)
Employment Insurance premiums are deducted from insurable earnings and matched at 1.4 times by the employer, funding benefits for workers who lose income.
G
General ledger
The general ledger is the complete record of every financial transaction a business posts, organized by account, and the source of all its reports.
Gross margin
Gross margin is revenue minus cost of goods sold, expressed as a percentage of revenue, showing how much of each sale is left to cover overhead.
GST/HST
GST/HST is Canada’s federal value-added tax: 5% GST in most provinces, or a harmonized HST that combines federal and provincial tax in five provinces.
P
PD7A remittance
A PD7A remittance is an employer’s payment to the CRA of the CPP, EI and income tax deducted from pay, plus the employer’s CPP and EI share.
Period lock / closing date
A period lock, or closing date, stops anyone from adding or changing transactions dated on or before a set date, protecting books already reviewed.
PIER review
A PIER review is the CRA’s check of filed T4 slips for under-deducted CPP and EI, after which the employer is billed for the shortfall and its share.
Point of sale (POS)
A point of sale is the system where a business rings up sales and takes payment, combining software, hardware and payments to track sales and stock.
Provincial sales tax (PST)
Provincial sales tax is a separate retail sales tax charged on top of GST in British Columbia, Saskatchewan and Manitoba, with its own rules and filings.
S
Source deductions
Source deductions are the income tax, CPP or QPP, and EI amounts an employer withholds from each pay cheque and remits to the government.
Statutory holiday pay
Statutory holiday pay is the wage owed to eligible employees for a public holiday, calculated by a formula set in each province’s employment standards law.