Glossary of Canadian brokerage accounting terms

This glossary defines the accounting, regulatory, and operational terms used across Canadian insurance brokerage bookkeeping. Each entry is intentionally short. For deeper coverage, follow the links to related guides and answer pages. For an overview of how these terms fit together, start with the premium trust accounting guide and Canadian brokerage financial compliance.

This is general information, not tax, legal, or regulatory advice. Confirm specific obligations with your CPA, your lawyer, and your provincial broker regulator.

A

Accounts payable (AP). Amounts a brokerage owes to others — most importantly, premiums payable to insurers for agency-bill business, plus operating expenses, producer commissions due, and trade payables. AP discipline is what protects the trust position.

Accounts receivable (AR). Amounts owed to the brokerage — typically client premiums on agency-bill business that have been billed but not yet collected, and commission income earned but not yet received from carriers. See carrier statement reconciliation.

Agency bill. A billing arrangement where the brokerage invoices the client, collects the premium, deducts its commission, and remits the net premium to the insurer. The brokerage holds client funds in a premium trust account until remitted. See: agency bill vs direct bill and the full accounting guide.

Alberta Insurance Council (AIC). The provincial regulator that licenses and oversees insurance agents and brokers in Alberta. Sets the conduct rules and financial requirements Alberta brokerages operate under.

AMF (Autorité des marchés financiers). Quebec’s integrated financial-sector regulator. Oversees the distribution of damage insurance (including brokers) under Quebec’s distribution of financial products and services regime.

Applied Epic. A broker management system (BMS) developed by Applied Systems and used by many Canadian brokerages. Combines client/policy management with an accounting module that handles agency bill, direct bill, premium trust, carrier statements, and the general ledger. See: does Applied Epic do accounting? and the Applied Epic accounting guide.

ASPE (Accounting Standards for Private Enterprises). The Canadian GAAP framework that most private Canadian brokerages report under. Defined in the CPA Canada Handbook. Public companies and some other reporting entities use IFRS instead.

Audit engagement. The highest level of assurance a CPA firm provides — an opinion on whether financial statements are fairly stated. Required by some regulators, lenders, and acquirers. BrokerLedger does not perform assurance work for its own clients; that work is referred to independent licensed public accounting firms.

B

Bank reconciliation. The monthly process of matching the brokerage’s bank account balance to its general ledger cash balance, item by item. A separate reconciliation is performed for the premium trust account and the operating account.

Broker management system (BMS). The software platform a brokerage runs its business on — client and policy data, document management, downloads from carriers, and (in systems like Applied Epic) accounting. The BMS is the source of truth a brokerage’s books should tie to.

C

Carrier. An insurance company that issues policies — the insurer behind a policy the brokerage places. In agency-bill business, the brokerage remits premium to the carrier; in direct bill, the carrier collects from the policyholder and pays the brokerage its commission.

Carrier statement. A periodic statement (often monthly) issued by an insurer to a brokerage summarizing policies, premiums, and commission activity. The starting point for carrier reconciliation. See: what is carrier statement reconciliation?.

Carrier reconciliation. The process of matching a carrier statement to the brokerage’s own records — policy by policy, premium by premium, commission by commission — and following up on differences. See the full carrier and commission reconciliation guide.

Chart of accounts. The structured list of general ledger accounts a brokerage uses. A brokerage chart of accounts should reflect premium trust, premiums payable to insurers, commission income by line of business, and producer compensation — not a generic small-business setup.

Commission income. The brokerage’s revenue from placing insurance — earned when the policy is bound and effective and the brokerage has substantially performed. Timing and recognition follow your accounting framework; confirm with your CPA. See: insurance commission revenue recognition.

Commission split (producer split). The portion of commission income paid to a producer under the brokerage’s compensation arrangement. Accounting needs to match commission earned to the corresponding split in the same period. See: producer commission split accounting.

Compilation engagement (CSRS 4200). A non-assurance engagement under the CPA Canada Canadian Standard on Related Services 4200 in which a CPA compiles financial information without expressing an opinion. Distinct from audit and review engagements. BrokerLedger does not perform compilation engagements for its own bookkeeping clients.

Contingent commission. A commission paid by a carrier above the base commission, contingent on the brokerage’s book performance — growth, retention, loss ratio. Often paid annually based on prior-year results. Timing involves judgement; confirm your recognition policy with your CPA. See: contingent commission accounting.

CRA (Canada Revenue Agency). Canada’s federal tax authority. Sets the rules every business follows for keeping books and records, filing the T2, payroll remittances, GST/HST where applicable, and information returns like T4 / T4A.

D

Direct bill. A billing arrangement where the insurer bills and collects premium from the policyholder directly, then pays the brokerage its commission — typically by way of a carrier statement. The brokerage does not handle the premium funds. See: agency bill vs direct bill.

F

Financial statements. A brokerage’s balance sheet, income statement, statement of cash flows, and supporting notes, prepared under ASPE or IFRS. See: insurance brokerage financial reporting KPIs.

FSRA (Financial Services Regulatory Authority of Ontario). Ontario’s financial regulator. Regulates life and health agents in Ontario, among other sectors. General-lines property and casualty brokers in Ontario are regulated by RIBO, not FSRA.

G

General ledger (GL). The set of accounts in which every transaction is recorded — the source of the trial balance and the financial statements. A brokerage’s GL should mirror the broker management system, not drift away from it on spreadsheets.

GST/HST. Federal/harmonized sales tax administered by the CRA. Insurance is generally treated as an exempt financial service for GST/HST, so commission for arranging insurance is typically not subject to GST/HST — though some broker fees may be taxable depending on the specific fact pattern. This is fact-specific; confirm your position with a CPA or the CRA. See: GST/HST on insurance brokerage commission.

I

IFRS 15. The IFRS revenue recognition standard. Applies to brokerages reporting under IFRS rather than ASPE. Recognition of commission income follows a defined model — confirm application with your CPA.

Insurance Council of British Columbia. The provincial regulator that licenses and oversees insurance agents and brokers in British Columbia. Sets B.C.’s conduct rules and financial requirements.

M

MGA (Managing General Agent). A specialized intermediary that holds underwriting authority from one or more carriers and distributes through brokerages. MGAs sit between the carrier and the retail brokerage and have their own accounting and reconciliation patterns.

Month-end close. The disciplined monthly process of recording, reconciling, and closing the books for a period — bank, trust, carrier statements, commissions, accruals, and the general ledger. See the brokerage month-end close checklist and Applied Epic month-end close.

P

PIPEDA (Personal Information Protection and Electronic Documents Act). Canada’s federal private-sector privacy law. Sets the rules for how a brokerage and its accounting provider collect, use, and protect personal information.

Premium. The amount charged for an insurance policy. In agency-bill business, the brokerage collects premium from the client and holds it in premium trust until remitted to the carrier.

Premium trust account. A segregated bank account in which a brokerage holds client premium funds in trust between collection and remittance to the carrier. Trust-account rules are set by the provincial broker regulator and vary by province. See: what is a premium trust account? and the premium trust accounting guide.

Premiums payable to insurers. The brokerage’s liability for premium it has collected on agency-bill business but not yet remitted to the carrier. The matching liability against premium trust cash. See: premium payable to insurers.

Producer. An individual who sells insurance for the brokerage — a licensed broker working under the firm. Producers are typically compensated by commission split on the business they write.

Profit-sharing commission. A class of contingent commission paid by a carrier based on the profitability of the brokerage’s book. Like other contingents, timing of recognition involves judgement.

R

Review engagement. A limited-assurance engagement under CPA Canada standards in which a CPA performs procedures sufficient to express limited assurance on financial statements. Less work than an audit, more than a compilation. BrokerLedger does not perform review engagements for its own clients.

RIBO (Registered Insurance Brokers of Ontario). The self-regulatory body that licenses and oversees general-lines property and casualty insurance brokers in Ontario. Sets Ontario’s broker conduct rules, trust-account requirements, and financial reporting expectations for general-insurance brokers. See: RIBO trust account requirements.

S

Sub-broker. A broker who places business through another brokerage — typically because the sub-broker lacks the carrier appointment or capacity. Commission flows from carrier to brokerage to sub-broker, each step needing accounting.

T

T2. The corporate income tax return that incorporated Canadian businesses, including most brokerages, file annually with the CRA. T2 preparation sits with a brokerage’s external accountant or CPA, not with BrokerLedger.

T4 / T4A. Federal information returns. The T4 reports employment income and source deductions; the T4A reports other income including, in some cases, payments to contractors and certain commissions. Filed annually with the CRA.

Trial balance. A list of every general ledger account and its balance at a point in time, used to confirm debits equal credits and to prepare financial statements.

Trust position. The relationship at a point in time between cash in the premium trust account and the brokerage’s offsetting liabilities — primarily premiums payable to insurers. A “surplus” means trust cash exceeds the liabilities; a “shortfall” means it does not. Trust position is the metric a brokerage’s monthly close should produce.

Trust shortfall. A condition in which the premium trust account holds less cash than the brokerage owes against it. Consequences are set by the provincial broker regulator; confirm specifics with your regulator. See: trust shortfall consequences.

W

Wholesale broker / surplus broker. A specialist intermediary that places hard-to-place or non-standard risks, typically through MGAs or non-admitted carriers. Has its own accounting patterns around premium handling and commissions.

Working papers. The supporting documentation a brokerage prepares (or that BrokerLedger prepares for the brokerage) to back the year-end financial statements — reconciliations, schedules, supporting calculations. A clean working-paper file makes the external accountant’s year-end engagement faster and cheaper.

Y

Year-end engagement. The work an external accountant or CPA performs at fiscal year-end — financial statement preparation, T2, and any assurance work a regulator, lender, or buyer requires. The cleaner the monthly close, the faster and less expensive the year-end engagement.

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