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Bookkeeping is the daily record of what a business earns and spends. In Canada you must keep it, with the receipts and invoices behind it, for six years from the end of the last tax year it relates to. You do not need special software. You need a routine, a separate bank account and one place for 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 |
| Long-term property, share registry or historical records | Indefinitely, if they affect a sale, liquidation or wind-up |
| An open objection or appeal | Until the latest of: it is resolved, the deadline for a further appeal passes, or the six years end |
| A dissolved corporation | Two years after the date of dissolution |
Want to throw records out early? You need the CRA’s written permission first, which you ask for on Form T137, Request for Destruction of Records. The CRA also says to keep records at your place of business or your home in Canada, and records stored only on a server outside Canada do not count unless the CRA agrees in writing.
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. The CRA’s page for businesses lists the exceptions in the table above.
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 does one month of books look like?
Say Marcus's painting business in London, Ontario invoices $8,000 in a month, with $1,040 of HST at 13%. He pays $2,600 of costs (paint, fuel, a ladder rental) and $338 of HST on them. Here is how his books show it.
| Line | Amount | What it is |
|---|---|---|
| Sales | $8,000.00 | Income, before tax |
| HST collected | $1,040.00 | Owed to the CRA, not income |
| Expenses | $2,600.00 | Costs, before tax |
| HST paid on expenses | $338.00 | Possible input tax credit |
| HST to remit | $702.00 | $1,040 minus $338 |
| Profit before income tax | $5,400.00 | $8,000 minus $2,600 |
The numbers are round on purpose, and they assume Marcus can claim every input tax credit, which depends on the expense. Keeping HST in its own lines is what lets him see at a glance that $702 is not his to spend.
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. That is the federal 9% plus an Ontario rate that fell from 3.2% to 2.2% on July 1, 2026, averaged over the year. A full year at the new rate would be 11.2%. 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.
Monthly bookkeeping feeds three basic financial statements, and you can read them without an accounting degree. The income statement lists sales and expenses and ends with profit. The balance sheet lists what the business owns and what it owes on one date. The cash flow statement follows money through the bank account.
Go back to Marcus's month. His income statement shows $8,000 of sales, $2,600 of expenses and $5,400 of profit before income tax. That figure does not tell him how much cash he has. If customers have paid only $5,000 of the $8,000 by the end of the month, the other $3,000 sits in accounts receivable: money he is owed but cannot spend yet. He also holds $702 of HST to remit, so the balance in his account overstates what he can keep.
Comparing profit with cash each month helps with business decisions, such as whether to buy a tool now or wait for the unpaid invoices to come in. A sole proprietor with a handful of transactions can start with three columns in a spreadsheet: sales, expenses and cash in the bank. The invoices, receipts and bank statements from the sections above give you everything the three statements need.
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 the CRA page on where to keep your records, for how long and how to request permission to destroy them early (date modified August 3, 2026). The small supplier rule comes from the CRA’s general information for GST/HST registrants, and the corporate rates from the CRA corporation tax rates page. We checked these in November 2026. The other figures come from the 2026 data behind our calculators. 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. A late-filed return starts the six years on the filing date, and a dissolved corporation keeps records for two years after dissolution. Long-term property and share registry records that affect a sale or wind-up are kept indefinitely.
Can I do my bookkeeping in a spreadsheet?
Yes, if the records let the CRA verify your income and the tax you owe. The CRA accepts paper or electronic records and does not prescribe a ledger layout. A tidy spreadsheet can work for a very small business, though most people move to accounting software once transactions pile up.
Do I need a separate business bank account?
The CRA pages we read do not require one. Still, running every business payment through its own account makes the monthly check against your bank statement far easier, and it keeps personal spending out of your deductions. Most small businesses find that the first habit worth building.
What is 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, so the two are easy to mix up when you price a job or a product.
How much HST goes on a $2,000 invoice in Ontario?
HST in Ontario is 13%, so a $2,000 invoice carries $260.00 of tax, for a total of $2,260.00. Your books should show $2,000 as the sale and $260 as tax collected. Whether you must charge it depends on whether you are over the $30,000 small supplier limit.
Can I throw away old receipts before six years?
Only with the CRA's written permission, which you request on Form T137. Destroying records without permission can lead to prosecution, according to the CRA. The six years run from the end of the last tax year the record relates to, so a 2020 receipt is generally kept until the end of 2026.
- 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