Financial line items are divided into categories using four-digit codes in the General Index of Financial Information (GIFI). All corporations filing T2 or T5013 forms, except insurance firms, must use this classification index when filing financial statements.
You can provide financial data on your original statements utilizing the GIFI unless the Canada Revenue Agency (CRA) specifically requests them. By correctly implementing GIFI codes, you can verify balances, assure compliance with tax laws and financial rules, and lessen the chance that reporting errors will result in a CRA business audit.
In certified tax preparation software, there is a general index of financial information.
You should use a CRA-approved tax software program, such as TurboTax, to ensure compliance with the law and to have accurate information for the tax agency because CRA-certified company or partnership tax software packages embed GIFI codes into the software. When you export data from other apps, like business cost trackers, into your Canada corporate tax forms, some utility programs modify your statements to comply with GIFI coding.
Short Form of GIFI
You must consult the CRA forms, schedules, and instructions for the correct codes for each financial statement item if you aren’t utilizing tax preparation software. You can consult Form T1178 for a list of the most typical items. As of October 2021, you must file Form T1178 if you are filing as a corporation, but you are not using software to prepare your return, and your gross income and total assets do not exceed $1 million each. Refer to a full list in the CRA’s RC4088 guide to the GIFI if you cannot discover the code you require on the short form.
GIFI Schedules for Partnerships and Corporations
Your opening and closing balance sheets and income statements can be submitted using GIFI schedules, including areas for each line item’s codes and amounts. Refer to Schedules T2SCH100, T2SCH101, and T2SCH125 for your income statement and balance sheets. Use T5013SCH100 and T5013SCH125 for your balance sheet and income statement if you run a partnership. For each statement, these schedules offer a useful array of standard codes. The schedules must have the same number of line items as your financial statements, and each must have a GIFI code. However, you are not required to include the details of every account or subaccount that contributes to your financial statements.
GIFI codes serve as a numeric classification system that organizes your important data so that computer programs may access it much more quickly. For instance, if you pay business taxes for your small business, you would list GIFI code 8762 as a line item in your statement. Government fees are listed under item 8764. The total of these two numbers is shown next to the line item for code 8760, or business taxes, licenses, and memberships, on a balance sheet or tax form submission.
Get Your Records in Order and Balance Your Books GIFI usage.
GIFI categorizes the codes into groupings such as assets, obligations, and income to make your bookkeeping easier to manage. To arrange your books by category and subcategory, simply provide the appropriate code for each accounting item and then sort them numerically. Making subtotaling simple also makes it easier to check whether your books balance correctly. You can monitor your cash flow by ensuring that your assets and income equal your revenue minus your expenses.
GIFI codes simplify bookkeeping, assist with balance verification, and guarantee proper tax filing compliance, sparing you the trouble of audits and providing additional evidence. Usage of these codes is now simpler than ever, thanks to tables and practical software like QuickBooks in both short and extensive CRA forms. GIFI codes are useful for monitoring your company’s financial status and looking for the best tax scenario each year.
How is GIFI Schedule 125 Prepared?
The income statement presented here is the GIFI version. These numbers were taken from the income statement created in Excel. As you’ll see, the codes highlighted in black for various financial statement items are GIFI codes.
According to the Excel income statement, “total sales of goods and services” has the number 8089 and a value of $100,000. The “total operating expenses” and the “income tax expense” amount to $12,859 and $13,600 respectively. This results in a net income of $73,541 which aligns exactly with the income statement based on the provided Excel.
Let’s examine the running costs and related GIFI codes that make this up in more detail. I have taken the Excel-based revenue statement and entered the expenses on each line item in the provided “Operating Expenses” schedule. For instance, the GIFI code 8521 for advertising has a $144 related cost. The overall operational expenses are $12,859, which matches the income statement based on the Excel file, and all other expenses are given below with their corresponding GIFI codes.
The General Index of Financial Information (GIFI) categorizes financial line items using four-digit codes. All corporations filing T2 or T5013 forms, except insurance companies, must use this classification index when submitting financial statements. Unless specifically requested otherwise, you can use the GIFI to give financial information on your original statements. You can ensure that financial and tax laws are followed, verify balances, and reduce the possibility that reporting errors will lead to a CRA business audit by correctly adopting GIFI codes.