GIFI Equity Accounts

Definition

Equity is the residual claim of shareholders after every liability is settled, and the GIFI reports it in two parts. Items 3500 to 3640 are the shareholder equity section of the balance sheet on Schedule 100. Items 3660 to 3849 are a separate statement, the retained earnings continuity, showing how the opening balance became the closing one.

For a typical CCPC both parts are short: common shares at item 3500, retained earnings at item 3600, and a continuity that runs opening balance, net income, dividends declared, closing balance. More complex corporations add preferred shares, contributed surplus, accumulated other comprehensive income and head office accounts.

Key rules

• Share capital: item 3500 Common shares and item 3520 Preferred shares. Use financial-statement carrying amounts. Accounting classification can differ from legal share capital, particularly for redeemable shares.
• Item 3540 Contributed and other surplus is the generic for the surplus block, with item 3541 Contributed surplus for capital donations, capital grants and paid-in surplus, and item 3542 Appraisal surplus.
• Item 3600 Retained earnings/deficit is the retained earnings figure shown inside the balance sheet. Item 3620 Total shareholder equity sums the whole equity section and has to be reported on every GIFI. Item 3640 Total liabilities and shareholder equity closes the balance sheet and equals item 2599 Total assets.
• The retained earnings continuity is item 3660 Retained earnings/deficit Start, plus item 3680 Net income/loss, less item 3700 Dividends declared, plus or minus item 3720 Prior period adjustments and item 3740 Other items affecting retained earnings, ending at item 3849 Retained earnings/deficit End.
• Item 3849 should be the same amount as item 3600. Item 3680 should be the same amount as item 9999 on Schedule 125, except that when item 9998 Total other comprehensive income is reported, item 3680 equals item 9999 plus or minus item 9998.
• Dividends declared reduce retained earnings when they are declared, not when they are paid. The generic item is 3700; item 3701 Cash dividends and item 3702 Patronage dividends are the detail items beneath it. The GIFI has no item that splits dividends into eligible and non-eligible, so that distinction is tracked in the books rather than on Schedule 100.

Example

The equity section and retained earnings continuity of a single-shareholder BC CCPC at its second fiscal year-end:

Both ties hold. Item 3849 at $113,100 equals item 3600 at $113,100, and item 3680 at $118,900 is the same amount reported at item 9999 on Schedule 125.

Common mistakes

• Reading item 3620 or item 3640 as retained earnings. Item 3620 is Total shareholder equity and item 3640 is Total liabilities and shareholder equity. Retained earnings on the balance sheet is item 3600.
• Reading item 3640 as net income. The item that carries net income into retained earnings is 3680, and it is the one that should equal item 9999.
• Using item 3600 for the opening balance of the continuity. The opening balance is item 3660; item 3600 is the closing figure carried on the balance sheet.
• Substituting a market valuation for the financial-statement share-capital amount without an applicable accounting basis.
• Treating declared but unpaid dividends as a liability without also reducing retained earnings. The debit to retained earnings at item 3700 and the credit to dividends payable at item 2962 are both recorded at declaration.
• Posting a shareholder capital contribution to revenue. A contribution increases equity at item 3541, not net income.
• Using the partnership items by mistake. Use CRA's separately labelled partnership section. The numeric span overlaps corporate item 3580, accumulated other comprehensive income; do not treat every number in that span as partnership-only.

Related concepts

The equity section closes Schedule 100. Learn the full coding system in GIFI Codes by Range, With the Most Used Codes, and the matching halves of the balance sheet at assets and liabilities. The movement through retained earnings is presented on the Statement of Retained Earnings. For structuring the share capital itself see Share Classes.