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A balance sheet lists what your business owns, what it owes and what is left for the owners, on one date. For a Canadian corporation it is the first of the four statements the federal rules expect, and the test is simple: assets must equal liabilities plus equity, to the cent.
Most owners never build one from scratch. Your accounting software produces it once the books are clean. But you should know what goes where, because a wrong label on one line is how a good year ends up looking like a bad one.
What goes on a balance sheet?
Three blocks, in a fixed order. The layout the accounting standard for private companies asks for separates current assets from long-term ones, and current liabilities from long-term ones, then shows equity and the two totals. The equation behind it is the one on Wikipedia’s balance sheet page: equity is what is left when you subtract liabilities from assets.
| Block | What sits in it | Typical lines |
|---|---|---|
| Current assets | Cash and things you expect to turn into cash soon | Bank balance, money customers owe you, stock on the shelf |
| Long-term assets | Things you keep using for years | Vehicles, equipment, a building |
| Current liabilities | Bills due soon | Supplier invoices, HST owing, payroll remittances, the next year of loan payments |
| Long-term liabilities | Debts due later | The rest of a term loan |
| Equity | What belongs to the owners | Share capital, retained earnings |
How do you prepare a balance sheet step by step?
Pick the date first. A year end is normal, but a month end works for a lender who wants to see one. Everything is measured on that day and no other.
Next, get the bank and credit card balances as they stood that evening, not the day you happened to open the statement. Then list what customers still owe you and what you still owe your suppliers. Add the HST you have collected but not sent in, and any payroll amounts you held back from staff and haven’t remitted yet. Those count as debts, even though they feel like your own money.
After that, list the long-term things. For each asset, record what you paid and what has been written off so far. For each loan, split the balance in two: the part you’ll repay in the next twelve months goes in current liabilities, and the rest goes below it.
Equity is the last line and the one you don’t type in freely. It is what makes the two sides match. If it doesn’t, something is missing or entered twice, and the fix is to find the entry, not to adjust the total.
What does a worked balance sheet example with a loan look like?
Say a small firm buys a van for $32,000 before tax and puts $3,000 down. The car loan calculator adds Ontario sales tax to reach $36,160, so the firm borrows $33,160. At 7.49% over six years the payment is $573.18 a month.
On the day of purchase the balance sheet shows the van at $36,160, $3,000 less cash and a loan of $33,160. The sides still match. Our own run of the loan maths puts the balance after twelve payments near $28,611, so about $4,549 of the loan belongs in current liabilities and the other $28,611 below it.
One caution. A business that can claim back the HST may record the van at a lower cost than the calculator shows, since the calculator uses the full tax. Ask your bookkeeper how your HST registration changes the figure.
Sales tax owing is a liability too. On a $250,000 sales year in Ontario, 13% HST is $32,500 collected for the government, and the GST/HST calculator shows how that rate splits on any single price. Whatever you haven’t sent in at year end sits on the balance sheet as money owed.
Where does the balance sheet go when you file?
A corporation’s T2 return asks for the same information in a coded form. The CRA’s General Index of Financial Information gives each line a code, and Schedule 100 is the balance sheet version. If your gross revenue or assets are $1 million or more, you file Schedules 100, 101 and 125. Below that, the short form T1178 is an option on paper filings. Filing software may handle this for you, so check what your tool does before you key anything twice.
The CRA says to use the same level of detail in the codes as in your own statements, so a bank line and a loan line shouldn’t be lumped into one code for tidiness.
The statements also have to reach your shareholders. Under section 155 of the Canada Business Corporations Act, directors put annual financial statements in front of shareholders at each annual meeting. That applies to corporations under that Act. Provincial corporations follow their own statute, so look at yours.
Can a small business get by with a simple version?
Often, yes. A sole proprietor with a handful of accounts can list them on one page: what’s in the bank, what customers owe, what’s owed to suppliers and the bank. That’s still a balance sheet, and it’s worth doing once a year even if no lender has asked. It shows whether you’re building something or just keeping busy.
The trouble starts when the business grows a loan, a vehicle and a payroll. At that point, let the software do the sorting and spend your own time checking that the labels are right.
What do you do with it once it’s built?
Read it like a lender would. Compare current assets with current liabilities: if the bills due in the next year are bigger than the cash and receivables coming in, you have a squeeze coming, even in a profitable year. Compare it with last year’s sheet too, and ask what moved and why.
Then put it somewhere safe. Come tax time, your accountant will start from this sheet, and a clean copy saves a few bucks of billable hours spent chasing missing figures.
What mistakes make a balance sheet wrong?
The big one is mixing dates. A bank balance from the 30th and a customer list from the 2nd can’t both be right. The second is leaving out bills that haven’t arrived yet. If the work was done before year end, you owe for it.
Owner withdrawals cause more trouble than anything else. Money you take out of a corporation isn’t always wages or a dividend, and it can sit on the books as a loan from or to you. Get that label right with the person who does your books, because it also affects your tax.
And keep the backup. The CRA’s guide Keeping Records says to keep records for six years from the end of the last tax year they relate to, and it names financial statements in its list of records. You stay responsible even if a bookkeeper holds them for you.
A profit doesn’t show up as cash on this page, which is what the income statement and the cash flow statement are for. If you want a quick look at margins before you build those, the profit margin calculator is a fast check.
Where the numbers come from
The statement list comes from the Canada Business Corporations Regulations, 2001, and section 155 of the Canada Business Corporations Act, both on the Justice Laws website. The GIFI and schedule thresholds are from the Canada Revenue Agency‘s corporation pages, and the record-keeping period is from its guide RC188. The layout rules are from Part II of the CPA Canada Handbook, described by CPA Ontario and other public sources. The loan figures come from our calculators and use 2026 rules for Ontario sales tax. Read the handbook section itself before you rely on a fine detail.
Frequently asked questions
What is on a Canadian balance sheet?
Assets, liabilities and equity at one date. Assets split into current and long-term, and so do liabilities.
Does a corporation have to file a balance sheet with the CRA?
The T2 return asks for the same information through GIFI codes. Schedule 100 is the balance sheet, and it is required if gross revenue or assets are $1 million or more.
How often should I prepare one?
At least once a year for the return and the shareholders. Many owners run one monthly, and lenders often ask for a recent one.
Why doesn't my balance sheet balance?
An entry is missing, doubled or dated wrongly. Find the entry. Changing equity to force the match hides the problem.
How long do I keep the statements?
The CRA says six years from the end of the last tax year they relate to, unless it gives permission to destroy them sooner.
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