Working capital is current assets minus current liabilities, measuring the short-term liquidity a business has to meet its obligations over the next year.
Working capital, current assets minus current liabilities, shows whether a business can cover its short-term obligations from its short-term resources. Positive working capital means current assets (cash, receivables, inventory) exceed current liabilities (payables, short-term debt, taxes owing); negative working capital can signal a liquidity squeeze.
It is a key measure of financial health that lenders scrutinise. Managing it well, collecting receivables promptly, negotiating supplier terms, controlling inventory, frees up cash and reduces reliance on borrowing. Working capital problems, not lack of profit, sink many otherwise viable businesses.
A company has $120,000 in current assets and $80,000 in current liabilities, giving $40,000 of working capital, a cushion to fund operations and absorb timing gaps between paying suppliers and collecting from customers.
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HST combines the 5% federal GST with a provincial component in five participating provinces. For 2026 the combined rates are 13% in Ontario, 15% in New Brunswick, Newfoundland and Labrador, and Prince Edward Island, and 14% in Nova Scotia since 1 April 2025. Elsewhere you charge the 5% GST alone, or GST plus a separate provincial tax. The rate follows the province of supply, not where your business sits.
A tax deduction is an amount subtracted from your income before tax is worked out, so it reduces the income being taxed rather than the tax bill directly. Its worth depends on your marginal rate: the higher the rate, the more the deduction saves. Common examples are RRSP contributions, child care costs, union dues, moving expenses and business expenses. Credits work the other way, reducing the tax calculated on that income.
Taxable income appears near the end of the income and deduction pages of your T1. Start with total income, subtract the deductions you claim to reach net income, then subtract the further deductions that apply to arrive at taxable income. The quickest place to read it is your notice of assessment or the summary page in your tax software. My Account shows assessed figures for earlier years if you need them.
Canadian sellers advertise pre-tax prices and add GST, HST or provincial sales tax at the till. Nothing requires tax-included pricing, rates differ by province, and taxability depends on what is sold: one trip to the till can mix fully taxable goods, zero-rated goods such as basic groceries, and exempt supplies. Fuel is the exception — the price posted at the pump already contains the fuel taxes and the GST or HST, so nothing is added when you pay.
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Reviewed and fact-checked by Udit Gupta
Ex Big 4 — Ernst & Young, Deloitte · International & cross-border tax specialist · CPA Canada (In-Depth Tax Program) · Chartered accountant, ICAI & MIA
Udit Gupta has over 15 years of experience helping corporations and business owners with corporate structuring, corporate tax filing, bookkeeping, payroll, GST/HST, cross-border tax and CRA representation. Big 4 trained at Ernst & Young and Deloitte, and qualified as a chartered accountant in India and again in Malaysia, he founded his accounting practice in 2014 to serve entrepreneurs, startups and non-resident business owners across Canada. View full member bio.
The Institute of Chartered Accountants of India — member 521458 · Malaysian Institute of Accountants — member CA 44667 · Ex Big 4: Ernst & Young, Deloitte · CPA Canada (In-Depth Tax Program), completed 19 Dec 2023 · In-Depth GST/HST Part I, 12 Jul 2022 · Part II, 5 Jul 2023
Editorial policy. Every page is researched against primary sources — the Income Tax Act, CRA publications and CPA Canada guidance — and every rate or threshold is stated with the tax year it applies to.
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