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The financial statements a Canadian business needs depend on how it’s set up. A corporation that files a T2 return gives the CRA its balance sheet and income statement in a coded form, and a federally incorporated one must also put annual statements in front of its shareholders. A sole proprietor has no such statutory package on the pages we checked. This page sticks to what official sources say and flags where they stop.
Which financial statements do most businesses use?
Three come up again and again. The balance sheet lists what the business owns and owes on one date. The income statement shows revenue and expenses over the year. The statement of retained earnings tracks profit kept in the company. A cash flow statement is common too, but it’s the one we didn’t find named in the CRA’s T2 instructions, so we won’t say the CRA wants it.
| Statement | What it shows | Where it goes |
|---|---|---|
| Balance sheet | Assets, liabilities, equity on one date | T2 Schedule 100 (GIFI) |
| Income statement | Revenue and expenses for the year | T2 Schedule 125 (GIFI) |
| Retained earnings | Profit kept after dividends | Part of the statements behind the T2 |
| Notes and Schedule 141 | Who prepared the statements and how | Filed with the T2 |
What does the CRA ask a corporation for?
The CRA tells corporations to include balance sheets, income statements and statements of retained earnings, at the level of detail of their own statements. How you send them depends on size. If both gross revenue and assets are under $1 million, the CRA points to Form T1178, the short General Index of Financial Information. If either is $1 million or more, you complete Schedules 100, 101 and 125. The details are on the CRA’s page on preparing financial statements using GIFI.
The page also says corporations that were inactive all year, with nothing to report, no longer attach Schedules 100, 125 and 141. And remember Schedule 141. Its questions cover who was involved with the financial information, and whether an auditor’s or review engagement report exists and whether reservations were expressed. So the form itself asks whether anyone outside the company checked the work.
No audit is required by that page, and it doesn’t mention audits at all. Whether you need one comes from other places, covered next.
What does company law require?
For a corporation under the Canada Business Corporations Act, section 155 says directors put comparative financial statements before shareholders at each annual meeting. That means the current period and the preceding year, plus the auditor’s report if there is one. The prior-year statements can be left out if the statements say why. Provincial corporations answer to their own statute, and each one differs.
Whether a business needs an audit turns on things like the statute, the articles, a shareholder agreement and whether it sells shares to the public. Lenders often ask for statements too, at a standard set by the loan agreement. There’s a federal process to seek an exemption from financial disclosure rules, which is a sign the rules do bind, but the tests are beyond this page.
What about a sole proprietor or partnership?
A sole proprietor reports on form T2125 inside the personal return, and nothing in what we read asks for a balance sheet. In practice you’ll still want one. A bank asking for a loan will ask for an income statement and often a balance sheet, and a simple profit and loss for the year is the minimum a sole proprietor needs to fill in that form properly.
Say Tess runs a sole proprietorship doing home renovations in Halifax. She doesn’t file statements with anyone, but when she applied for a van loan the bank wanted two years of income figures. Two clean profit and loss reports saved her a month of scrambling.
A worked example with numbers
Take a small Ontario corporation with $300,000 of active business income. The corporate tax calculator shows total tax of $35,088, or 11.7%, leaving $264,912 in the company. That result uses a blended small-business rate for 2026 that isn’t published as such, so it’s an estimate, not a filing number.
Your statements are where that income figure starts. If the income statement is wrong, so is every number after it. To test the statement itself, use the profit margin calculator: a $100 sale with $60 of cost gives a 40% gross margin. If your statements show something wildly different from your own trade, look for the mistake there first. A quick ballpark check like that costs nothing.
Common mistakes with statements
Most are boring.
Mixing personal and business spending is the big one. It turns the income statement into a guess. Another is booking a year’s payroll without checking your remittances, which the payroll remittance calculator can help with. And some owners leave the notes blank because the balance sheet looks tidy, then find Schedule 141 wants details.
Close the books shortly after year end, while you still remember what the odd payments were.
What this page is based on
The T2 requirements come from the Canada Revenue Agency pages on preparing financial statements using GIFI and on Schedule 141. The shareholder rule comes from section 155 of the Canada Business Corporations Act on the Justice Laws website, current in September 2026. The tax example is from our own 2026 calculator data. We didn’t check audit thresholds or provincial rules, so look them up for your corporation. We’re an independent site, not connected to the CRA or any government.
Frequently asked questions
What financial statements does the CRA want with a T2 return?
The CRA names balance sheets, income statements and statements of retained earnings, reported through GIFI schedules.
Which T2 schedules do I complete?
Under $1 million, the CRA points to Form T1178. At $1 million or more, Schedules 100, 101 and 125, plus Schedule 141.
Do I need an audit?
We couldn't find a CRA page requiring one. It depends on the corporate statute, your articles, any shareholder agreement and lenders.
What does the Canada Business Corporations Act require?
Section 155 says directors place comparative financial statements before shareholders at each annual meeting, with an auditor's report if there is one.
Do inactive corporations attach these schedules?
The CRA says corporations inactive all year with nothing to report no longer attach Schedules 100, 125 and 141.
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