At a Glance

Losses represent a decrease in business resources or assets. Once incurred, losses cannot be recovered.

The most common cause of loss for business is selling goods and services for less than the business expenses, as indicted in the example below.

A Simple Example

A dentist running her business at the heart of Vancouver recorded a loss in 2019 resulting from the following transactions:

What loss means for your business

While it does not positively impact a company, a loss should not result in the demise of a business. But repeated losses can threaten the existence of any business.

Businesses typically get out of losses by cutting down on expenses, sourcing for cheaper raw materials and labour, or outsourcing certain functions including HR, accounting, or marketing. Even as a profitable business, make sure that you always have a plan in place to get our of a loss because even highly profitable businesses can easily be in the red without proper planning.

On the brighter side, if you've recorded a loss, ensure that you talk to an accountant to find our how you can use it to minimize your taxes.