COMMON QUESTIONS ABOUT YOUR FINANCIAL STATEMENTS

Questions about your financial statements? Here are the answers to some real ones — these are actual questions our clients have asked us over the years, and we add to this page as new ones come up.

Q: I don’t understand my financial statements! A: Have you read our guide to understanding financial statements? Start there, then come back here for the specifics.

Q: I take it the ($10,000) showing is a loss? It’s in brackets and says “surplus before taxation.” A: Yes, that’s correct. Brackets mean a negative figure — a loss, in this case.

Q: How do these figures actually turn into a tax refund? A: Unless it’s a loss from a rental property, the loss generally offsets your other income. Say you earned $100,000 in salary and paid $22,877.50 in tax on it. We take the $10,000 loss and deduct it from your income, bringing it down to $90,000. Tax on $90,000 comes to $19,577.50. The difference — $3,300 — is your refund.

Note: losses from rental property can only be offset against rental income, not against your salary or other income. Any excess loss carries forward to future years instead. You can offset loss from one rental property against profit from another in some circumstances.

Q: I notice Retained Earnings showing for one balance date, then nothing for the next? A: Yes, that’s correct. The earnings weren’t yet “retained” as at your balance date — they became retained the following day, once the year officially closed off. It’s a timing quirk of how retained earnings get calculated, not an error.

Q: There’s a Shareholder Loan Accounts line showing two different figures. Are these what we’ve each contributed to the company? A: Yes, that’s correct. They’re determined according to each shareholder’s actual contributions.

Q: There’s a Directors’ Report — do we need to print it out and sign it? A: Yes, please; or e-sign it.

Q: What about the Annual General Meeting report on the last page — do we actually have to go out to a restaurant for this? A: You don’t have to, but it’s not a bad idea. Keep the receipts either way — and don’t forget your parking and babysitter receipts. You do need to action the AGM report itself, though: print, sign, and return it. The deadline depends on your filing month with the NZ Companies Office — check the Companies Register(opens in new tab) to confirm yours.

Q: The notes on “Income Tax Expense” — is that payable by us? Or is that what IRD pays us? A: Neither, directly. This is a standard note explaining how income tax is accounted for within the financial statements themselves, not a statement of what you owe or are owed. For a rental property, the statements we produce generally show the profit or loss from the business — we take that figure and include it in your tax return, and the actual tax to pay or refund shows up there, not in the financial statements themselves.

Other Questions You Might Have

• Rental Property: What Records Do You Need to Keep?
• Annual Tax Questionnaire
• How Do I Download Transactions from My Bank’s Online Internet Banking?
• What Is Xero.com?
• What’s the Process for My Tax Returns?
• Common Questions About Your Tax Returns
• Understanding Financial Statements
• Changes to Financial Reporting Requirements for SMEs

Still Have a Question?

If your question isn’t answered here, it might just be one we haven’t added yet. Contact us and ask directly — real client questions are exactly how this page grows.