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Bookkeeping is recording every sale, bill and receipt as it happens. Accounting is turning those records into a tax return and a picture of how the business is doing. People lump the two together, but the CRA only cares that the first one exists and is solid: you must keep your records for six years from the end of the last tax year they relate to.
What does bookkeeping have to cover for the CRA?
The CRA’s wording is short. Records must be reliable and complete, they must carry the information you need to meet your tax duties and work out your credits, and documents must back them up. That means the invoice or receipt behind each entry. A line in a spreadsheet won’t do on its own. Records can be kept in English or French.
| Rule | What the CRA says |
|---|---|
| How long | Six years from the end of the last tax year the record relates to |
| Where | At your business or home in Canada, unless the CRA gives written permission otherwise |
| Electronic records | Must stay readable and accessible to the CRA, with proper backups |
| Long-term property, share registers | Keep indefinitely |
| Destroying early | Only with the CRA’s written permission (Form T137) |
Read the “where” line twice. The CRA page says records you reach electronically from outside Canada don’t count as kept in Canada. If you use online software, ask what your backup plan is, and keep a copy at home or the office. The CRA’s page on where to keep your records and for how long spells out the six-year rule, the indefinite cases and how to ask permission to destroy records early.
Bookkeeping vs accounting: what is the difference?
Bookkeeping is the daily record of money in and out: sales, bills, receipts, accounts payable and accounts receivable. Accounting starts where bookkeeping ends. It takes those entries and builds financial statements, the three most common being the income statement, the balance sheet and the cash flow statement. The income statement shows revenue and expenses over a period, the balance sheet shows what the business owns and owes on one date, and the cash flow statement shows where cash came from and where it went.
Clean bookkeeping makes accounting faster and cheaper, because whoever prepares the statements or your tax return does not have to sort out missing entries first. Accounting software usually sits in between. It records the transactions, matches them to bank feeds and produces basic reports, but it still relies on someone coding each entry correctly. Whether you do the bookkeeping yourself or hand it to someone, the CRA record rules above apply to you as the owner.
How does bookkeeping work day to day?
Most small businesses follow the same short cycle. Record each sale and each expense with its receipt. Match the entries to the bank statement once a month. Check what customers still owe you and what you still owe suppliers. Then close the month with a summary of income and expenses. Bookkeeping skills matter less than the habit of doing this on schedule.
There are two methods. Single-entry bookkeeping lists each transaction once, like a chequebook, and suits a very small business. Double-entry bookkeeping records every transaction in two accounts, so the books balance and errors show up quickly. Accounting software is built on double-entry, which is why it can produce a balance sheet and cash flow report without extra work.
Do you need a bookkeeper or can you do it yourself?
For a one-person business with a few dozen transactions a month, a spreadsheet and a folder of receipts can be enough. Things change when you have staff, sell across provinces, or charge GST/HST. That’s when mistakes start costing real money.
We can’t tell you what bookkeepers or software cost, or which product is best. Prices move, and we couldn’t confirm any figure from an official source, so we’ve left them out. Here are the questions worth asking instead.
- Will I own my data, and can I export it in a standard file if I leave?
- Does it handle GST/HST for my province, and keep the receipts with each entry?
- Who does the payroll remittances, and who is answerable if one is late?
- How are records backed up, and where are they stored?
If a lender wants financial statements, ask the lender what it expects before you hire anyone. It’s a short call and it can save you paying twice.
What should good books show you?
Three answers, always. What did you earn, what did it cost, and how much of the difference will go to tax. Take a sole proprietor in Ontario with $80,000 of net business income. The self-employed tax calculator gives $13,233.57 of income tax and $8,892.90 of CPP, since you pay both halves. That’s $22,126.47 in all, leaving $57,873.53, or 27.7% of income taken. It excludes GST/HST, EI and business expenses, so your real bill depends on what your books hold.
Then check the margin on what you sell. Sell at $100 with a cost of $60 and the profit margin calculator shows a 40% margin, which is a 66.7% markup on cost. Owners mix those two up all the time, and it leads to underpricing.
If you collect sales tax, the GST and HST calculator splits a price into the base and the tax. At 13% in Ontario, $100 becomes $113. That $13 isn’t your income, so it shouldn’t sit in the same pot as your profit.
What goes wrong most often?
Mixing personal and business spending is the big one. It makes every category harder to trust, and it hides the real cost of running the business. Open a separate account and stick to it. Even a double-double on the way to a client meeting is easier to sort when it comes off the business card.
Next comes waiting until year end. Receipts fade, and you forget what a $340 charge was for. A weekly half hour beats a weekend of panic when the receipts are in six different places.
Third, forgetting the tax bill is coming. No employer withholds tax on your business income, so instalments may apply during the year. The tax instalments calculator is a good place to start. If you have employees, the payroll remittance calculator shows what you must send in.
Last, throwing records away on a hunch. Six years is the general rule, but the CRA says some records, like those on long-term property, have no end date.
What if you’ve lost receipts or fallen behind?
Don’t hide it, and don’t invent paper. Ask your bank or card issuer for statements, ask suppliers to reissue invoices, and rebuild the year from those. Then set up a simple weekly habit so it doesn’t happen again. If you’re months behind, a bookkeeper catching you up once is usually cheaper than a rushed mess at filing time. Rebuilding is tedious, but it’s far better than guessing.
How often should you update your books?
Weekly works for most small owners, and monthly is the floor. Reconcile your bank account against your records each month, and file receipts the same day they arrive. That rhythm also makes GST/HST returns and payroll remittances far less stressful.
Where this information comes from
The record-keeping rules come from the Canada Revenue Agency pages on business records. Tax figures come from our 2026 calculators, which use published CRA and Ontario data rechecked in September 2026. This website has no link with the CRA, and nothing here is a fee quote or a product review.
Frequently asked questions
What is the difference between accounting and bookkeeping?
Bookkeeping records each sale, bill and receipt as it happens. Accounting turns those records into tax returns and reports.
How long must I keep business records in Canada?
Generally six years from the end of the last tax year they relate to, according to the CRA. Records on long-term property and share registers are kept indefinitely.
Can I keep my records in the cloud?
The CRA says records must be kept at your business or home in Canada unless it gives written permission, and records reached electronically from outside Canada don't count. Keep a backup copy in Canada.
Can I throw records out early?
Only with the CRA's written permission, requested on Form T137 or by writing to your tax services office. Destroying them without permission can lead to prosecution.
How much does a bookkeeper cost?
We couldn't confirm fee levels from an official source, so we don't quote any. Ask for a written scope and price before you sign.
- Self-employed taxes in Canada: income, CPP and GST
How tax works when you are self-employed in Canada: reporting income and expenses, paying both halves of CPP, instalments and when to register for GST