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Bookkeeping is the daily record of what your business earns and spends, and in Canada you have to keep that record, with the papers behind it, for six years from the end of the last tax year it relates to. You don’t need special software or an accounting degree to do it. You need a routine, a separate bank account and a place to put receipts.
What does a bookkeeper actually record?
Four things: money in, money out, tax collected and tax paid. Every sale gets an invoice and every cost gets a receipt. Each entry lands in a category, so that at year end you can add up rent, supplies, fuel and wages without digging.
The CRA doesn’t prescribe a ledger layout. Your records only have to let it verify your income and the tax you owe, and paper, electronic or a mix are all acceptable. So a well-kept spreadsheet can work for a very small business. Most people move to accounting software once they have more than a handful of transactions a week.
How long do you keep records?
| Record | How long |
|---|---|
| Books, invoices, receipts, bank statements | Six years from the end of the last tax year they relate to |
| A return filed late | Six years from the filing date |
| Records for property and share registers | No end date, so keep them |
| An open objection or appeal | Until it’s settled |
| A dissolved corporation | Two years after dissolution |
Want to throw records out early? You need the CRA’s written permission first. Don’t skip that step.
Keep your tax documents and records for at least six years.
How long should you keep your income tax records, canada.ca
That line is written for individuals, and the business rule is the same six years.
How do you set up bookkeeping that holds up?
Open a business account and run every business payment through it. Then pick a day each week for entering receipts, and a day each month for checking the books against the bank statement. It takes maybe an hour once you’re used to it.
Keep scans in one folder, named with the date and vendor. A phone photo is fine if you can read it later. If you’re unsure whether a cost is a business expense, note it and ask your accountant at year end.
Picture Marcus, a painter in London, Ontario. He does a monthly check on the first Sunday: tick every bank line against a receipt or invoice, flag the three he can’t place, and chase those while the job is still fresh. When the shoebox approach turned up a $400 paint order he couldn’t prove, that habit paid for itself.
How does sales tax show up in the books?
Keep it apart from your income. In Ontario, HST is 13%. On a $2,000 invoice, the GST and HST calculator adds $260.00 for a $2,260.00 total, and your books should show $2,000 as the sale and $260 as tax. Got a receipt with tax already in the price? The HST reverse calculator splits it back out.
Whether you have to charge it at all depends on the small supplier rule. The CRA’s guide for GST/HST registrants defines a small supplier as a person whose revenue from worldwide taxable supplies, together with associated persons, was $30,000 or less in a single calendar quarter and over the last four consecutive calendar quarters. Once you go over, you must register within 29 days. The wording is in the CRA’s general information for GST/HST registrants. Count your revenue every quarter, and don’t wait for year end.
What numbers should you look at each month?
Profit first. If an item costs you $60 and sells for $100, the profit margin calculator shows a 40.0% margin and a 66.7% markup, so the two are easy to mix up. Margin is a share of the selling price. Markup is a share of the cost.
Then look at tax. A sole proprietor with $80,000 of net income owes about $22,126.47 of income tax and CPP in Ontario, according to the self-employed tax calculator. That excludes EI and business expenses. If you run a corporation, the corporate tax calculator shows 11.7% combined on the first $500,000 of small business income in Ontario for a calendar 2026 year. Good books are what make figures like these possible before tax time, so you can put a few bucks aside every month and not scramble in April.
Where bookkeeping goes wrong
- Business and personal spending in the same account.
- Receipts thrown out, then no proof for a deduction.
- Catching up once a year, when memories are gone.
- Recording a payment with tax included as if it were all cost.
Payroll is its own job. If you have staff, the payroll remittance calculator shows what an employer adds on top of pay. On a $2,000 cheque in Ontario, its default settings show $156.63 of employer CPP and EI.
Our sources
The record keeping rules come from CRA pages on keeping records, read on 30 September 2026. The tax and rate figures come from the 2026 data behind our calculators. The Ontario corporate rate is a calendar-year blend, not a published rate. We’re an independent site, and no government body is behind it.
Frequently asked questions
How long must I keep bookkeeping records in Canada?
Six years from the end of the last tax year they relate to, according to the CRA's record pages.
Can I do my bookkeeping in a spreadsheet?
The CRA accepts paper or electronic records if they let it verify your income and tax. A tidy spreadsheet can work for a very small business.
Do I need a separate business bank account?
The law doesn't say so in the pages we read, but it makes bookkeeping far easier.
What's the difference between margin and markup?
Margin is profit as a share of the selling price. Markup is profit as a share of cost. A $60 item sold at $100 has a 40.0% margin and a 66.7% markup.
How much HST goes on a $2,000 invoice in Ontario?
$260.00 at 13%, for a total of $2,260.00.
- 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