Owners’ Equity = Contributed Capital + Retained Earnings; Balance sheet is Assets = Liabilities

+ Owners’ Equity
Revenue - Expenses = Net Income/Loss; Assets = Liabilities + Contributed Capital + Retained
Earnings
Contributed capital is the investment of the owners' cash or assets to the company.
Retained earnings are the accumulated profits to date, less any dividends or other amounts
paid to investors. Retained earnings are equity that has resulted from profitable activities.

Contributed capital is equity created through investments by shareholders and owners.

Owners’ equity is divided into contributed capital (equity created through investments by
owners or shareholders) and retained earnings (equity that has resulted from the organization’s
profitable activities).
The Income Statement is a financial statement which presents the revenue, expenses, and
net profit or losses of an organization during a specified period of time.
One of the most common methods of reconciling expense accounts is by reasonableness test
TYPE OF ACCOUNT NORMAL DEBIT ENTRY CREDIT ENTRY
BALANCE

Asset Debit Increases Decreases

Balance Balance

Liability Credit Decreases Increases

Balance Balance

Revenue Credit Decreases Increases

Balance Balance

Expense Debit Increases Decreases

Balance Balance

Owners Equity / Shareholders Credit Decreases Increases

equity Balance Balance

2 types of accruals: continuous and specific. Continuous accruals are used to record the ER’s
expenses for workers’ compensation premiums and vacation pay. This accrues continuously and
paid at the end of year.
specific accrual is for labour costs related to a particular period. Specific accruals reflect an
expense incurred in one period that is reallocated to another period or periods. Specific
accrual entries are reversed: in the next accounting period
When an organization incurs a liability in one accounting period and is to pay that liability in a
different accounting period, accrual accounting must be used.
All the accounts that we use to record financial transactions form the General Ledger of an
organization. The purpose of the General Ledger is to keep an organized record, by account,
of the organization's financial transactions.
Double-entry accounting means: the total of the debit amounts must equal the total of the
credit amounts
In double-entry method of accounting, the left side of the account, the debit side, is always
entered first, followed by the transactions to the credit side.
At the end of the accounting period, the revenue and expense accounts are closed out to zero
balances, with the resulting net income being added (credited) to the owners’ equity account on
the Balance Sheet. A net loss would be subtracted (debited) from the owners’ equity account.
General Ledger Account: An expense account is debited to increase the expense and
credited to decrease the expense. The amounts in the expense accounts are cleared at the
fiscal year-end. Credit entries to a liability account increase the liability and debit entries to the
liability account decrease the account. Liability accounts are not cleared at fiscal year-end. All
accounts in the general ledger can have two types of entries: debits and credits
Reasonableness = General Ledger
Journal entries-Credit entries to a liability account increase the liability and debit entries to
the liability account decrease the liability.
Expense accounts continue to build over time and are not cleared until the end of the fiscal
period. The most common reconciliation methods used for these accounts are "reasonableness"
and "year-over-year comparison". The reasonableness test requires an individual examine a
general ledger account in detail and ensure that all postings to it, and the balance, seem
reasonable. A year-over-year comparison would compare each expense account for a certain
time frame to determine if there have been material changes.
Each journal entry must contain the following components: a journal entry reference or number,
the date of the transaction, the debit and credit amounts to be applied to each account, a total
of the debit entries and the credit entries, and a brief explanation of the transaction.
The benefit entitlement is the portion of a member's pension that is considered to have
accrued during the year. It applies to defined benefit pension plans only.
Benefit entitlement = Final average earnings x benefit percentage rate
The abbreviation "ZZ" signifies "other" and is used for employees who worked in a country
other than Canada or the United States or worked in Canada beyond the limits of a province or
territory such as on an offshore drilling platform.
Box 14 - Include all salary, wages, bonuses, wages in lieu of notice, vacation pay, tips and
gratuities, honorariums, directors’ fees, commissions, taxable allowances, TXB Grp term, AD&D
and the value of taxable benefits (including any taxable PST/GST/QST/HST component), top-ups
that do not qualify as supplementary unemployment benefit (SUB) plans (for example,
maternity, parental and compassionate care)
When amending a T4 slip do not submit an amended T4 Summary.
If an employee sold property or negotiated contracts for the employer, the commission amount
paid to the employee is reported under Code 42 and the amount is also included in Box 14 on
the T4 information slip.
The benefit provided to an employee for free or subsidized housing, meals or board is reported
under code 30 on the T4 information slip. This amount is also included in Box 14.
The most common reporting errors occur when amounts are not correctly reported in box 24 (EI
insurable earnings), box 26 (C/QPP pensionable earnings) and box 28 (Exempt for C/QPP or EI).
Enter an “X” under “CPP-QPP” only if the earnings were exempt from CPP or QPP for the entire
year. Do not complete the “CPP-QPP” part of this box if an amount was entered in box 16, 17 or
26.
Employee pension adjustments earned during the year are reported in Box 52 of the T4
information slip.
Employee contributions to a Registered Pension Plan are reported in Box 20 on the T4.
Code 77 for workers compensation reimbursement to the employer
A penalty of $100.00 per occurrence can be assessed for failure to make a reasonable effort to
get an employee's Social Insurance Number.
Where more than six codes apply to the same employee in the "other information" area of the
T4, a second T4 slip must be completed.
The pension adjustment formula is used to calculate a pension credit for a defined benefit
pension plan. The benefit entitlement is multiplied by 9, and then $600.00 is subtracted from
the result. The pension adjustment is always rounded to the nearest whole dollar = Pension
Adjustment = (9 x benefit entitlement) - $600.00
Pension Adjustment is not calculated on RRSP
2,000.00 for each calendar year, or part year, prior to 1995 , $1,500.00 for each year or part
year of service, prior to 1988. The calculated amount is the eligible portion of retiring
allowance. Years from 1984 to 1995 inclusive = 12 years= 12 x 2000
Years from 1984 to 1988 inclusive = 5 years = 5 x 1500
Code: commission earnings – 42, non-eligible retiring allowance – 67
Employer-provided automobile benefits is 34, interest-free loan taxable benefit is 36 (Home
relocate ion Load).
Code 52 - Report the total employee plus employer RPP contributions for the year.
Failure to meet the Canada Revenue Agency T4 filing deadline can result in penalties of $25.00
a day for each failure with a maximum penalty of $2,500.00.
Commissions paid to a self-employed agent are reported on the T4A.
A pension credit reflects the value of the benefit that a member earns under a defined
contribution plan, defined benefit plan, or a DPSP provision of an RPP plan.
If the employer provides the employee with other taxable allowances and benefits which are
not included elsewhere on the T4 slip enter code 40 and the corresponding amount, eg: Parking
Txb Bft, Grp Term life Insurance, Taxable car allowance, ER contribution to RRSP, Country club
membership.
A pension adjustment reduces the amount an individual can contribute to their RRSP.
A pension adjustment is the measure of a benefit that an individual earns in a year in a regular
registered pension plan or a deferred profit-sharing plan set up by the employer. The Canada
Revenue Agency terms these benefits "the member's total pension credits".
The maximum annual benefit entitlement for an employee is limited to $3,756.67 for 2025.
If there are no pensionable and Insurable earnings enter “0.00” in Box 26 and Box 24
Code 36 on the T4 information slip is used to report interest-free or low-interest loans including
a qualified home purchase loan. This amount is included in Box 14.
If an employee sold property or negotiated contracts for the employer, the commission amount
paid to the employee is reported under Code 42 and the amount is also included in Box 14 on
the T4 information slip.

Totals T4Box/Code

Regular earnings 14/24*/26*

Vacation pay 14/24*/26*

Wages in lieu of notice 14/24*/26*

Eligible retiring allowance 66

Non-eligible retiring allowance 67

Employer-provided automobile non-cash taxable 14/26*/34

benefit

Employer contribution to employee’s RRSP 14/24*/26*/40

Employee RPP contributions (plan #1234560 –Box 20/52

50)

Employer contributions to the RPP 52

Employer-offered dental benefits code 45

Box 018 on a T4A
Statement of Pension, Retirement, Annuity and Other Income is used to report lump-sum
payments.

Box 14 of the T4 information slip is not completed when using employment codes applicable to
placement agencies, taxi drivers or other passenger-carrying vehicles, barbers or hairdressers
and self-employed fishers, provided there is no other type of income being reported.
Organization's source deductions remittance frequency depends on the amount of the average
monthly withholding amount for the second preceding calendar year.
The payment for quarterly, regular, and accelerated threshold 1 – is due by a specified date
based on the payroll payment date.
Accelerated threshold 2 remitters are required to remit their payroll source deductions at a
Canadian financial institution, either electronically or in person, or through their payroll service
provider.
The remittance for accelerated threshold 2 remitters is due three business days after the end of
the weekly period established by the CRA, in which the payroll payment date falls.
REMITTER TYPE PAYROLL CHEQUE/DEPOSIT REMITTANCE IS DUE NO LATER
ATES THAN...
Quarterly January 1 – March 31 April 15
April 1 – June 30 July 15
July 1 – September 30 October 15
October 1 – December 31 January 15
Regular 1st of the month to the end The 15th of the following month
of the month
Accelerated 1st to 15th of the month The 25th of the same month
threshold 1 -$25,000.00 to 16th to end of the month The 10th of the following month
$99,999.99
Accelerated 1st to 7th of the month 3 business days from the last day
threshold 2 - $100,000.00 8th to 14th of the month
15th to 21st of the month
 22nd to end of the month
The PD7A form is for regular and quarterly remitters, and the PD7A(TM) form is for accelerated
remitters. The PD7A(TM) is sent for the previous quarter's transactions in April, July, October
and January.
Number of Slips – 1 – 5 all three filings; 6 – 100 – T4 Web forms & Electronic; 101 and more-
Electronic
The penalties for late remittances are as follows:
• 3% if payment is late 3 business days or less, • 5% if payment is late 4 or 5 business days, •
7% if payment is late 6 or 7 business days
• 10% if payment is 8 or more business days late
The Canada Revenue Agency (CRA) may apply a penalty of up to 10% of the required amount of
CPP, EI and income taxes, for late remittances (20% on the second and later occurrences).
The payroll cheque date is the date when the money is paid to the employee or directly
deposited in their bank account determine the proper remittance date
Under the defined benefit pension plan, employers are required to make current service
contributions.
In addition to current service contributions, employers are obliged to make additional
contributions to defined benefit plans when a liability accrued in respect of past years. For
example, where there was a benefit upgrade affecting past service, there would be money
owing to the plan to fund this benefit upgrade. These liabilities are generally referred to as
unfunded liabilities, and pension benefits legislation requires they be amortized over a
certain period.
In addition to unfunded liabilities, which are determined on an ongoing basis, certain events
may take place that were not originally predicted by the actuary, such as a larger than normal
group of employees retiring early or investment losses within the plan. These are referred to as
solvency deficiencies and must be paid down (amortized) over a certain period.
Unfunded liabilities and solvency deficiencies are called special contributions.
British Columbia requires that member contributions for defined benefit and defined
contribution plans be remitted no later than 30 days after the end of the month in which
contributions are deducted.
The due date for a maintenance order or garnishment in Ontario is within 14 days of receiving
the order.
For pension plans registered in Alberta, British Columbia, Manitoba, Newfoundland and
Labrador, Nova Scotia, Ontario and Saskatchewan, member contributions for defined
contribution plans must be remitted monthly, no later than 30 days after the end of the month
in which the sum is deducted.
Prince Edward Island has not yet enacted its own pension legislation and therefore defaults to
the Federal Pension and Benefits Standards Act.
Exhibit 3-1 TYPE OF PLAN FORMULA FOR CALCULATING THE PENSION
ADJUSTMENT

Defined Contribution Pension Plan (or Employer contributions + employee

Money Purchase) contributions + reallocated forfeitures +
 additional voluntary contributions (AVCs)*

Defined Benefit Pension Plan (9 x benefit entitlement) - $600

Deferred Profit-Sharing Plan Employer contribution + reallocated

forfeitures

Combination Plan Total of all pension credits for each

component

Employee contributions to a Registered Retirement Savings Plan are not reported by payroll; the employee will
receive a tax receipt from his/her financial institution.