CHAPTER 14 A-FN-105-001/AG-001

FINANCIAL STATEMENTS

INTRODUCTION

1. This chapter outlines the requirements for financial statements and describes the
accounts, formats, and procedures used for preparing financial statements.

FISCAL YEAR

2. The fiscal year for most NPP operations is from 1 April of the current year to 31
March of the following year with all accounting periods/accounting months ending on the
last day of the calendar month. The exceptions are the NPF Employees Pension Fund,
SISIP FS, and CFPAF where the period of operation is 1 January to 31 December.

PURPOSE OF FINANCIAL STATEMENTS

3. Financial statements are intended to be understandable by readers who have a

reasonable knowledge of business activities, a basic understanding of accounting and
who are willing to study the information diligently. The purpose of financial statements
is to provide relevant and reliable financial information to help decision makers assess
the entity’s ability to meet financial obligations, achieve both short-term and long-term
goals and also to evaluate management’s stewardship. Financial statements are
prepared in accordance with Canadian generally accepted accounting principles, to
fairly present the financial position and the results of operations for the period ending as
at the balance sheet date. A set of financial statements for each entity shall consist of
the following and are submitted in the order indicated:

a. Balance Sheet including the Equity Statement (reporting assets,

liabilities and equity - reflecting the current financial position);

b. Notes/schedules to the Balance Sheet;

c. Cash Flow Statement (reporting the change in financial position);

d. General Revenue and Expense Statement and/or Income

Statement(s) (reporting revenues and expenses - directly related to an
entity’s financial performance);

e. Notes/schedules to the General Revenue and Expense and/or Income

Statement(s); and

f. Departmental Analysis Report (DAR) (for resale activities).

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FREQUENCY OF FINANCIAL STATEMENTS

4. CANEX financial statements shall be prepared:

a. as at the end of each accounting month for all outlets and distributed to
managers within 10 working days after the closing date.

5. Base Fund, Subsidiaries, Messes and Units Financial statements shall be

prepared:

a. normally, as at the end of each accounting month and distributed to

managers within 10 working days after the closing date. However, with
CFO approval, a RAM may issue statements less frequently than monthly,
but in no event shall they be issued less frequently than quarterly (30 Jun,
30 Sep, 31 Dec, and 31 Mar).

6. Reserves Financial statements shall be prepared:

a. normally, as at the end of each accounting month and distributed to

managers within 15 working days after the closing date. However, with
CFO approval, a RAM may issue statements less frequently than monthly,
but in no event shall they be issued less frequently than quarterly (30 Jun,
30 Sep, 31 Dec, and 31 Mar).

DISTRIBUTION OF FINANCIAL STATEMENTS

7. All entity financial statements are verified and approved prior to distribution by
the National Financial Reporting Office (NFRO) monthly. Once approved completed
and verified, the statements are sent from the Base Accounting Office to entity
managers. DGPFSS Headquarter financial statements are prepared and distributed by
the Management Accountant.

8. NPPAMs are responsible to ensure that all managers requiring financial

statements receive them. Managers include BComd or their designate, B Adm O, B
Compt, PSP Manager, PMC, and entity or other managers as required.) RAMs will
provide guidance on financial statement distribution where needed.

REQUIREMENT PRIOR TO PREPARATION OF STATEMENTS

9. Prior to the preparation of the financial statements, the NPPAM shall ensure that
all known material transactions affecting the operation of the entity concerned have
been recorded in the books of account.

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GUIDE TO THE PREPARATION OF FINANCIAL STATEMENTS

10. Entity Balance Sheet: A standard balance sheet format is used however,
accounts receivable and accounts payable have been bought by the CFCF - thus they
are not reflected on the Balance Sheet. Explanations for items on the balance sheet
are as follows, with items that are only applicable to specific entities annotated as such:

a. Assets

(1) Current Assets. These are those assets ordinarily realized in cash
or consumed within one year from the date of the balance sheet or,
within the normal operating cycle when the cycle is longer than a
year. Such assets include but are not limited to:

(a) cash;

(b) inventory;

(c) prepaid expense; and

(d) loan receivable current.

NOTE: An asset subject to restrictions that prevent its use for

current operating purposes should not be included as a current
asset.

(2) Petty Cash and Change Funds. This includes all petty cash,
change, and imprest funds;

(3) Share of Consolidated Bank Account (CBA). This is the amount

on deposit by each entity in the CBA. If this account reflects a
credit balance, it must be shown as a current liability under the
same heading;

(4) Foreign Exchange Position. (European Operations). This

account represents the exchange rate variance or difference
between the amount shown in a foreign currency bank account and
the actual value, using Director of Pay Services (DPS) rates, shown
on the European Operations control balance sheet;

(5) NPP Transfers. Central Processing asset account used for

internal transfers;

(6) Inventory. This is the total value of merchandise inventories at

cost held by the entity;

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(7) Prepaid Expenses. These are expenses paid in advance for

goods or services acquired to earn revenues in future periods, such
as, one-year inventory of consumable supplies or equipment
maintenance contracts that will expire over a specific period. When
assessing the requirement to establish prepaid expense accounts,
the materiality of the amounts involved and the remaining period
should be considered. (Note: the administrative burden precludes
recording prepaid expense for total amounts less than $200.00).
The total expense amount will be prorated over the period of usage
specified on invoice posting and expense recognition will
commence on the expense allocation start date;

(8) Loans Receivable - Current. This is the portion of loan that is

receivable within one year of the balance sheet date;

(9) Total Current Assets. This is the total of all the individual current
assets;

(10) Work in Progress. This account records the value of incomplete

capital projects that have not yet been transferred to fixed assets;

(11) Loans Receivable - Non-Current. This is the total of loans

outstanding at the date of the balance sheet less any current
portion at subparagraph 8 above);

(12) Fixed Assets - Net Book Value. This is the total net value of the
original acquisition cost of all depreciable fixed assets less the
accumulated amortization recorded in the books of the entities, as
at the Balance Sheet date;

(13) Investments. These are monies that, have been approved by the
CFO (in accordance with Chapter 9 (Consolidated Banking
System)) to be invested in third party organizations. This item
requires a note to the financial statements indicating the authority
for such investments.

(14) Investment in Subsidiaries. This item reflects the subsidiary’s net

worth/investment, for entities such as golf clubs, curling clubs, etc.
The amount will be the sum of the subsidiaries’ balances for
Retained Earnings, Prior Year Adjustments, Year to Date (YTD)
Net Income, and Contributed Capital;

(15) Total Assets. This is the total of all assets;

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b. Liabilities

(1) Current Liabilities. These are those short-term obligations

payable within one year from the date of the balance sheet or,
within the normal operating cycle when the cycle is longer than a
year (the normal operating cycle should be the same as used for
current assets);

(2) Share of Base CBA. This is the entity's Share of the CBA, if it
reflects a credit balance (overdraft);

(3) NPP Transfer. Central Processing liability account used for

internal transfers;

(4) Public Grants. This represents the total of the public grant trust
account balances, included in the entity’s (e.g. Base Fund) Share of
the CBA;

(5) Trust Funds. This represents the total of the non-NPP trust
account balances, included in the entity’s (e.g. Base Fund) Share of
the CBA;

(6) Entity Funds. This represents the total of the entity fund balances,
included in the entity’s (e.g. Base Fund) Share of the CBA;

(7) Accrued Liabilities. These are liabilities which have been

incurred, but for which payment has not yet made by the end of the
current accounting period. An example would be wages earned but
not yet paid; “Accrued Wages”;

(8) Unearned (Deferred) Revenue. Unearned revenue is revenue

received in advance of being earned and thus, revenue recognition
must be deferred until the future period or periods in which the
revenue is to be recognized/earned. Examples include such things
as payments received in advance of providing the goods or
services to the customer for which the revenue will be recorded at a
later date (e.g. CANEX Special Orders, associate members mess
dues, layaway deposits).;

(9) Loans Payable - Current Portion. These are the principal

payments on loans outstanding due within one year of the balance
sheet date;

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(10) Total Current Liabilities. This is the total of all the individual
current liabilities;

(11) Long-Term Liabilities. These are those liabilities payable at a

future date greater than one year from the date of the balance
sheet or, after the normal operating cycle when the cycle is longer
than a year;

(12) Loans Payable – Non-Current. This includes the residual portion

of all loans after the current portion is deducted. The National
Fixed Assets Office (NFAO) will confirm all CFCF loan balances
with the base annually.

(13) Total Liabilities. This is the total of all liabilities.

c. Equity

(1) Opening Retained Earnings. This normally is the same figure as

the closing Retained Earnings of the prior year-end. For entities
with subsidiaries, the total under this item will be the sum of the
entity and the subsidiaries’ Retained Earnings balances;

(2) Prior Year Adjustments. Prior Year Adjustments (PYA) are rare
and shall be used for adjustments related to changes in accounting
policy (as directed) or for a correction of an error in prior period
financial statements. Errors include a mistake in computation,
misinterpretation, or misrepresentation of information, an oversight
of information and a misappropriation of assets. To ensure
materiality, thresholds are established whereby the value per
occurrence must be in excess of $10,000 for CANEX and $2,000
for Non-CANEX activities;

NOTES:

a. Each PYA shall be explained in the notes to the financial

statements; Annex A is to be completed at the base
accounting level and submitted to the NPP Regional
Accounting Manager. The RAM will forward to the
appropriate level for approval. Once approval has been
obtained, the National Financial Reporting Office will action
and annotate an explanatory note on the financial statement.

b. Adjustments that would otherwise qualify as a PYA but do

not exceed the applicable threshold shall be charged against
the Miscellaneous Expense or Revenue account of the outlet
or entity.

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(3) Net Income/Loss. This is the entity’s net income earned or loss
incurred for the period ending as at the Balance Sheet date and is
the total of all revenue and expense accounts of the entity. At fiscal
year-end all revenue and expense accounts are closed to Retained
Earnings;

(4) Increase/ (decrease) in Investment in Subsidiaries This item

shows the sum of the subsidiaries’ income/(loss) and any PYA’s
actioned in the current year;

(5) Closing Retained Earnings. This is the total of subparagraphs (1)

to (4),

NOTE: After the year-end Financial Statements have been

prepared, all revenue, expense, and PYA accounts must be closed
to the entity's Retained Earnings account.

(6) Contributed Capital. This is the portion of an entity’s equity that

represents investments in the entity by its stakeholders. By
definition, the Contributed Capital account cannot have a debit
balance unless a bookkeeping error is made. For entities with
subsidiaries, the total under this item will be the sum of the entities
and the subsidiaries’ Contributed Capital balances. This account is
not closed to Retained Earnings at fiscal year-end;

(7) Total Equity. This is the total of subparagraphs (5) and (6), and

(8) Total Liabilities and Equity. This is the total of subparagraphs 10

(b)(13) & 10 (c)(7) and should balance to Total Assets – paragraph
10 (a)(15)

11. General Revenue and Expense Statement. This statement presents the
consolidated results of all outlets and activities operating within the entity. Explanations
for items on the statement are as follows with items that are only applicable to specific
entities are annotated accordingly:

a. General Revenue

(1) Operating Income/Loss. This is the operating income or loss

carried forward from the income statements of each outlet;

(2) Contribution from CANEX (Base Fund only). This is the CANEX
Royalty received by Base Fund;

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(3) Contributions from Messes/Others (Base Fund only). This is

the revenue received from the messes and other entities in
accordance with CFAO 27-6;

(4) Interest Revenue. This includes interest earned from cash

deposited with the CFCF and from CFO authorised bank accounts
or investments;

(5) Mess Membership (Mess only). This is the general mess

assessment received from mess members;

(6) Sports Functions. These are revenues incurred as a result of

sporting events held for the benefit of military members. (All sports
revenues and expenses are to be Special Function (SF) accounts
linked to the applicable control account.)

(7) Entertainment Functions. These are revenues related to

functions held for the benefit/entertainment of mess members. (All
entertainment revenues/expenses are to be SF accounts linked to
the applicable control account.)

(8) Private Functions. These are the revenues related to functions

held in a mess other than for the benefit of members (e.g.,
weddings, etc). All private function revenues and expenses are to
be recorded against private function SF accounts linked to the
applicable control account.

(9) Official Function See Chapter 38 (Function Recapitulation

Voucher). These revenues are recorded in a SF account linked to
the applicable control account.

(10) Miscellaneous General Revenue. This includes miscellaneous

revenues that do not regularly occur and for which a separate
account has not been established in the chart of accounts;

(11) Total General Revenue. This is the total of subparagraphs (1) to

(10);

b. General Expense

(1) Payroll Cost-Salaries/Employer Payroll. These are the gross

amounts paid as calculated from the payroll journal. This includes
all salaries, incentives, and bonuses paid by the employer for
employees directly involved with the operations of the outlet. Also
included are all costs to the employer resulting from employing
personnel such as premiums to Canada Pension Plan (CPP),

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Vacation Pay, Group Medical, Government Employees’

Compensation Act (GECA), bereavement commemoration, etc.
For full-time employees the employer payroll costs will be a
percentage amount of the gross amount paid (includes salaries,
incentives, and bonuses paid by the employer);

(2) Accounting Services. These are the accounting services user

fees charged to entities based upon the costs of accounting
operations. These costs may be recovered from each entity, based
on a predetermined allocation;

(3) Human Resources (HR) Services. These reflect the costs of HR

operations;

(4) Administrative Services. This relates solely to payroll expenses

for administrative services incurred. Miscellaneous administrative
expenses shall be charged against Miscellaneous General
Expense;

(5) Maintenance and Other Support Services. This is the cost of

cleaning services, salaries for building maintenance, etc;

(6) Depreciation. This is the depreciation expense for fixed assets

that cannot be logically charged to a specific outlet (e.g. equipment
in the mall and common areas);

(7) Travel. This is the travel expenses incurred by the manager and
staff of each outlet;

(8) Contributions to Base Fund. These are the funds remitted by the
messes and other entities to the Base Fund in accordance with
CFAO 27-6;

(9) Loan Interest. This reflects all interest charges on loans payable
shown on the balance sheet;

(10) Cash Discounts Lost. This represents all purchase discounts lost
by the entity, where discount terms had been offered by suppliers
for prompt payment for goods and services. This expense shall not
be allocated to the outlets as the expense is incurred primarily by
delays in payment of invoices;

(11) Sports Functions. These are expenses incurred as a result of

sporting events held for the benefit of military members. All sports
revenues and expenses are to be SF accounts linked to the
applicable control account.

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(12) Entertainment Functions. These are expenses related to

functions held for the benefit/entertainment of mess members. All
entertainment revenues/expenses are to be SF accounts linked to
the applicable control account.

(13) Private Functions. This is the expenses related to functions held

in a mess other than for the benefit of mess members (e.g.,
weddings, etc). All private function revenues and expenses are to
be recorded against private function SF accounts linked to the
applicable control account.

(14) Official Function (see Chapter 38 Function Recapitulation

Voucher). These functions are linked to the applicable control
account.

(15) CO's Representation (Base Fund only). This represents the

expenses incurred by the CO to meet obligations to represent the
Department, Command or the unit as authorized by CFAO 27-6;

(16) CFPAF Levies (Welfare Contributions Only). In accordance with

Chapter 10 (CFCF Contributions – Loans and Grants), Base Fund,
subsidiaries, messes, clubs and ships’ retail activities and unit,
branch, regimental and group fund retail activities (e.g. kitshops)
must allocate a percentage of sales to CFPAF – (0.25 % of all bar,
food and retail sales. CANEX – .15 % of total sales);

(17) Contribution to HQ (CANEX only). In accordance with Chapter

10, 1% of all sales is charged to each CANEX for CANEX HQ
Expenses;

(18) Bad Debts. Since CFCF has purchased the accounts receivable
from each Base/Wing/Unit, the responsibility for bad debts and
payment now rests with CFCF. Since the accounts receivable
account represents uncollected amounts already included in
revenue, losses that may arise through failure to collect any of the
receivables should be recognized as an expense of doing business
during the same period in which the revenue was made. To cover
these losses, each item reported as accounts receivable by CFCF
will be charged a percentage fee to cover the estimated percentage
that will not be collected. This charge will be reflected in the
Base/Wing/Unit bad debt expense account. If, at the end of the
fiscal year, the result indicates that the actual recovery experience
of accounts receivable for an entity was different from the estimated
percentage, the actual experience percentage will be utilized for the
following fiscal year. Any amount charged in excess of the actual
experience will be returned to the entity in the year it was charged.

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(19) Loss/ (Gain) on Exchange Rate. This represents the loss or gain
on the revaluation of foreign currency holdings;

(20) Loss/ (Gain) on Disposal of Fixed Assets. This is the amount

received below or in excess of the net book value of disposed
assets;

(21) Base Fund Internal Grant Expense. In accordance with Chapter

10 (CFCF Contributions – Loans and Grants), Base Funds may
grant funds (Internal Grant) to Subsidiaries, Entity Funds, Units,
Messes, and Institutes in support of Morale and Welfare activities to
offset prior period losses, operating expenses in the current period,
and/or to reduce the cost of acquiring or constructing fixed assets.
All Base Fund internal grants are recorded as Base Fund grant
expense and as a credit to the receiving entity’s grant revenue in
the current accounting period.

NOTE: Recurring grants such as annual Base Fund per capita

activity grants to lodger units in support of social and recreational
activities are not, for the purpose of this regulation, considered
Base “internal grants” and thus are recorded as a component of
normal operations.

(22) Miscellaneous General Expense. This includes miscellaneous

expenses that do not regularly occur and for which a separate
account has not been established in the chart of accounts;

(23) Total General Expense. This is the total of subparagraphs (1 to

(22);

c. Income/ (Loss) Before Internal Grant, and Extraordinary Items section

of the General Revenue and Expense (GR&E) statement. This is the
result of subtracting Total General Expenses from Total General
Revenues.

(1) Internal Grant Revenue. In accordance with Chapter 10 (CFCF

Contributions – Loans and Grants), Base Funds may grant funds
(Internal Grant) to Subsidiaries, Entity Funds, Units, Messes and
Institutes in support of Morale and Welfare activities to offset prior
period losses, operating expenses in the current period, and/or to
reduce the cost of acquiring or constructing fixed assets. All Base
Fund internal grants are recorded as Base Fund grant expense and
as a credit to the receiving entity’s grant revenue in the current
accounting period.

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NOTES:

a. Recurring grants such as annual Base Fund per capita

activity grants to lodger units in support of social and
recreational activities are not, for the purpose of this
regulation, considered Base “internal grants” and thus are
recorded as a component of normal operations.

Internal grants affect the Entity profitability therefore

appropriate disclosure in a note to the financial statements is
necessary to assist in evaluating the impact of internal grant
funds on Entity operations. The following disclosure of grant
assistance shall be made:

i. the amount and purpose of the grant; and

ii. the accounting month and year, the entry was

actioned (see 11.(c)(1)b.).

b. Disclosure notes shall be carried forward for as long as

relevant for historical and comparative purposes.

(2) Extraordinary Items. These include revenue, expenses, gains, or

losses exceeding $2,000 resulting from transactions or events that
are not expected to occur frequently over several years, do not
typify the normal business activities of the entity; and do not
depend primarily on decisions or determinations by management or
owners. D Acct or D Fin approval (dependent upon the chain of
command) is required prior to being actioned in the books of
account. Annex A is to be completed and sent to NFRO. Upon
approval, NFRO will record the extraordinary item(s) in the books of
account and disclose in a note to the financial statements the
nature of the transactions or events giving rise to the extraordinary
items(s), the amount, and when the item was recorded. An
example of an extraordinary item is:

(a) a hurricane causes severe damage to a Yacht Club Marina

in a location where storms of this magnitude are a very rare
occurrence. This situation has all the characteristics of an
extraordinary item;

12. Net Income/ (Loss) Before Distribution. This is the net amount earned during
the period by the entity;

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13. Royalties (CANEX only). These are the amounts paid by CANEX to each Base
Fund. The amount of royalties paid each month consists of the following two
components:

a. sales royalties of 0.6% (5% for CFB Suffield) of total sales (i.e. consumer
plus wholesale sales);
b. concession royalties of 15% of YTD concession net income is paid to base
fund. In circumstances when YTD Concession Net Income is negative,
this royalty component will not apply.

14. Distribution to Units. This is the amount of funds distributed to units or

organizations in accordance with special agreements;

15. Distribution to Base Fund (Non-CANEX entities only). This is the portion of
net income transferred from entities to Base Fund. This is set at the local level by each
base fund and applicable representatives.

16. Operational Support Grant. This is a grant given from Base Fund in support of
operations under authority of Chapter 2 (Financial Concepts).

17. Net Income/ (Loss) After Royalties and Distribution. This is the amount
which is included in Retained Earnings;

NOTE: The CANEX General Revenue and Expense Statement will show the
total Consumer Sales and the total Wholesale Sales for all outlets at the end of
the statement.

18. Income Statement. This statement shall be prepared for all outlets.
Explanations of the items shown on the statement are as follows:

a. Operating Revenue

(1) Consumer Sales. These are the sales of merchandise or services

to consumers. Payment is generally made with cash, cheque,
credit card or under the credit plan;

(2) Wholesale Sales. These are the sales of merchandise or services

by CANEX outlets to non-CANEX NPP organizations (e.g. mess,
Base Fund clubs). Normally these sales generate a lower gross
profit margin than Consumer Sales;

(3) NPP Transfers. This is the total of NPP goods transferred from
CANEX to the Public in the period. To ensure that there is no
conflict of interest; goods transferred from CANEX to the Public
shall be excluded from all royalty calculations. NPP Transfers are
recorded net of federal and provincial sales taxes;

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(4) Total Sales. This is the total of amounts recorded as “Consumer

Sales”, "Wholesales Sales”, and "NPP Transfers" for the period.

(5) Cost of Goods Sold. This is the difference between the cost of
goods available for sale during a period and the cost of the unsold
goods on the hand at the end of the period. (Beginning inventory
plus cost of purchases less ending inventory). Can be estimated
based on a fixed cost multiplier, perpetual inventory system or
adjusted to actual based on a physical stock count.

(6) Gross Profit. This is the net difference between Total Sales and
the Cost of Goods Sold;

b. Operating Expenses

(1) Payroll Cost-Salaries/Employer Payroll Expense. These are the

gross amounts paid as calculated from the payroll journal. This
includes all salaries, incentive, and bonuses paid by the employer
for employees directly involved with the operations of the outlet.
Also included are all costs to the employer (the outlet) resulting
from employing personnel such as premiums to Canada Pension
Plan (CPP), Vacation Pay, Group Medical, Government
Employees’ Compensation Act (GECA), bereavement
commemoration, etc. For full-time employees the employer payroll
costs will be a percentage of the gross amount paid (includes
salaries, incentives, and bonuses paid by the employer);

(2) Depreciation. This is the charge to depreciation expense for the

decline in the net book value of fixed asset items during the
reporting period;

(3) Utilities. This includes the cost of heating, ventilation, air

conditioning services, electricity and electricity systems, water and
water systems, and sewage and sewage systems;

(4) Advertising/Promotions. This covers all costs (production,

printing, and distribution) of advertising material used in or by the
outlet. This could include local newspaper advertising or in store
promotional material, promotions, special events, special
entertainment or activities, public relations, prizes, gifts, draws, etc;

(5) Club Xtra. This covers the cost of Club Xtra gift cards redeemed at
CANEX outlets;

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(6) Supplies. This includes the cost of supply materials (bags,

wrapping paper, string, etc.) consumed in support of the sale of
merchandise or services;

(7) Repairs and Maintenance - Furniture and Effects (F&E) (See

Chapter 28 Fixed Assets). This covers non-capitalized repairs and
maintenance to F&E (e.g. repairs to electrical motors in freezer
equipment, painting of vehicles, etc);

(8) Repairs and Maintenance - Buildings. (See Chapter 28 Fixed

Assets). This covers non-capitalized repairs and maintenance to
the building not considered a public responsibility (e.g. floor
cleaning);

(9) Telecommunications. This includes all telecommunication costs

(telephone, mobile, message centre, and technical services) that
are not a public responsibility. See A-PS-110-001/AG-002 for
further information.

(10) Cash (Over)/Short. This includes the daily cashiers over/short

reported on the Daily Sales Report (DSR) and any verified
differences reported by the bank;

(11) Equipment Rental. This includes the cost of any rented

equipment;

(12) Travel. This includes all costs of travel incurred by NPP outlet
employees on behalf of the outlet;

(13) Stationery. This covers all expenditures for outlet office supplies;

(14) Postage. This includes all outlet postage and courier services
expenses.

(15) Credit Card Fees. These are the service charges associated with
processing credit cards and debit cards;

(16) Terminal Fees. These are the fees paid for each terminal setup
within an outlet;

(17) Bar Mix. This includes bar mix costs which, as a matter of policy,
are expensed immediately;

(18) Bar Snacks. This includes those bar snack items provided free of
charge which, as a matter of policy, are expensed immediately;

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(19) Janitorial/Cleaning. This covers all cleaning expenses except

payroll which will be charged against the payroll expense account;

(20) Vehicle Expense This includes vehicle costs such as gas, and
repairs incurred in maintaining vehicles for outlet use;

(21) Loan Interest. This reflects all interest charges on loans payable
shown on the balance sheet;

(22) Miscellaneous Operating Expense. This includes miscellaneous

expenses which do not regularly occur and for which a separate
account has not been established.

(23) Total Operating Expense. This is the total of subparagraphs (1)

to (22).

c. Other Revenue

(1) Commission Revenue. This is, for example, a commission paid to

the outlet by the Lottery Corporation when a winning lottery ticket is
sold to a customer. Commission on the sale of Money Orders is
another example;

(2) Miscellaneous Revenue. This includes miscellaneous revenues

which do not regularly occur and for which a separate account has
not been established in the chart of accounts;

d. Operating Income/ (Loss). This is the total of gross profit minus

operating expenses plus other revenue. This amount is carried over to the
General Revenue and Expense Statement.

NOTE: For CANEX Income Statements that include Department 40

(gasoline) or Department 46 (propane), the number of litres sold is to be
indicated at the bottom of the Income Statement.

NOTES TO FINANCIAL STATEMENTS

19. Notes are an integral part of the financial statements required in circumstances
where there is a need to provide management with further clarification and/or an
explanation of financial items presented. Notes may take the form of an explanation in
narrative form or a schedule. Schedules are generally used to break down an amount
in the financial statements (e.g., when that amount is a total of more than one general
ledger account). When a narrative format is used, the financial statement item is cross-
referenced to the note and the note shall include the amount of the entry, the date the
entry was made, and a brief narrative of the issue giving rise to the note.

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CHAPTER 14 A-FN-105-001/AG-001

20. Circumstances requiring a note to the financial statements include but are not
limited to:

a. All contributed capital entries;

b. All prior year adjustments;

c. All extraordinary revenue or expense items;

d. Financial statements deemed incomplete or inaccurate;

e. All investments in third party organizations; and

f. Any direct adjustment to retained earnings other than the normal year-end
closing of the operating revenue and expense accounts.

Annex A - Request approval for prior year adjustment and extraordinary item

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