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Small business bookkeeping comes down to one habit: record every sale, expense and tax amount when it happens, and keep the paper or file behind each entry. The CRA says most businesses must keep their records for six years from the end of the last tax year they relate to. Get that right and tax time is mostly a matter of adding up.
What does a small business have to keep?
The CRA wants accounting and other financial documents, and what counts depends on your business: your income, your expenses, any vehicles and your property. It also changes if you’re registered for GST/HST, have employees or sell online.
The format is up to you. The CRA’s page on keeping records says paper, electronic or a combination of the two is fine, and it has a section on backing up electronic files. Scan the receipt if you like, but make sure the scan is readable.
| Question | What the CRA says |
|---|---|
| How long to keep most records | Six years from the end of the last tax year they relate to |
| Destroy earlier? | Only with the CRA’s permission |
| Records that may need keeping indefinitely | Long-term property purchases and sales, share registry, history affecting a sale or wind-up |
| Format | Paper, electronic or both, with backups |
How do you set up a simple bookkeeping system step by step?
Bookkeeping is the recording side of the books: every sale, bill and payment goes in with the document behind it. Accounting uses those records to prepare statements and work out the tax. The CRA does not issue record books or recommend a type of book or system, so a ledger with separate columns for income and expenses, a spreadsheet or software all do the job, provided the records are clear and easy to read.
- Open a separate bank account for the business and keep the duplicate deposit slips, bank statements and cancelled cheques. If you run more than one business, keep separate records for each.
- Record income as it comes in, including the date, the amount and the source. Count it whether you were paid in cash, property or services, and back each entry with an original document such as a sales invoice, a receipt, a bank deposit slip or a contract.
- Record every expense and get a receipt or voucher. A proper receipt shows the date, the name and address of the seller and of the buyer, and a full description of what was bought. For a purchase of $100 or more before tax, it should also show the seller's business number if the seller is a GST/HST registrant.
- Keep a property record for anything you buy or sell, with who sold it to you, the cost and the date. The CRA says this information helps you calculate capital cost allowance and other amounts.
- Do not send these records in with your return. Keep them in case the CRA asks to see them later.
The CRA defines records broadly. Its list runs from ledgers, journals and financial statements to sales invoices, bank statements, credit card receipts, contracts, logbooks and emails that support your transactions. If a document backs up a number in your books, keep it with the entry.
What does a simple weekly routine look like?
Take Marcus, who sells hand-built furniture from a shop outside Moncton. On Friday afternoons he does four things. He enters the week’s sales, enters every bill he paid, matches the bank balance to his books and puts the paper receipts in a labelled folder. It’s 30 minutes with the radio on.
- Sales and invoices, including the sales tax on each
- Bills paid, with the receipt attached
- Bank and card statements matched to entries
- Anything you paid personally for the business, noted so you can be repaid
Miss a week and it’s easy to catch up. Miss a quarter and you’ll be guessing.
What is the difference between bookkeeping and accounting?
The two words overlap, which is why people mix them up. Bookkeeping is the daily record of business transactions: sales, bills, payments, deposits and credit card charges, each tied to a document. Accounting works on top of that record. It turns the transactions into financial statements and reports, and it is where tax is worked out. The CRA lists financial statements, ledgers, journals and statements of accounts among the records you must keep, so both sides leave paper or files behind.
Think of cash flow as the test of good bookkeeping. If every payment in and out is recorded with the right date, you can see how much cash the business really has, which invoices clients still owe you and which bills are coming. If entries are late or missing, even the best accounting software will report wrong numbers. Accurate transactions are what an accountant, a bookkeeper or a tax preparer all depend on.
Bookkeeper vs software: which should a small business use?
Volume decides it, and so does how much you hate the work. A sole proprietor with a few dozen transactions a month can manage in a spreadsheet or a basic app. Once you have staff, several income streams or GST/HST filings, the time cost climbs quickly.
We can’t tell you which product or firm is best, and we won’t pretend to. We couldn’t verify prices or feature claims for any of them. What you can check yourself is short: does it keep a full audit trail of changes, can you export everything if you leave, and does it show sales tax separately from income? Ask a firm for its fee in writing, and ask what happens to your files if you stop using it. Our guide to choosing a tax preparer has more questions of that kind.
How do sales taxes change the books?
Tax you collect isn’t revenue. Take a $1,000 sale in Ontario. The GST and HST calculator shows $130 of HST, so the customer pays $1,130. Your income is $1,000, and the $130 is owed to the government if you’re registered.
In Alberta the same sale carries $50 of GST, for $1,050. In BC you’d add PST too, as our guide to British Columbia sales tax explains. Book the tax on its own line every time. Mixing it into sales is the fastest way to end the year with revenue you never really had.
What should the books tell you about profit?
Margin is the number people confuse. If an item costs $60 and sells for $100, the profit margin calculator shows $40 of profit, a 40% margin and a 66.7% markup. Margin is a share of the price. Markup is a share of the cost, so it’s always the bigger number.
That matters when you price. Add 40% to your cost and you don’t get a 40% margin. You get about 28.6%. Your bookkeeping should let you see the real margin by product or job, not a guess.
What if you lose a receipt?
It happens to everyone. Don’t invent a replacement. Write a short note with the date, the supplier, what it was for and the amount, and keep the matching bank or card line next to it. Ask the supplier for a copy if they can reissue one. A note plus a bank record isn’t perfect, but it beats an empty gap.
Where do bookkeeping mistakes come from?
Mostly from waiting.
Receipts pile up, memories fade, and a $200 supplier bill turns into “something in March”. Set a fixed weekly slot, even 30 minutes, and stick to it like a client meeting you can’t move.
Personal and business money in one account is next. It makes every entry a question. Open a business account, and pay yourself from it on purpose.
Payroll deserves its own line. Deductions you hold back from employees and the share you add are owed to the CRA, and the payroll remittance calculator gives an estimate per pay period. If the business is a corporation, the corporate tax calculator shows what the year’s profit is likely to cost in tax.
The last mistake is throwing things out early. Six years is the rule for most records, and some need to stay much longer.
Where the numbers come from
The record-keeping rules come from the Canada Revenue Agency’s pages on keeping records, read in September 2026. The tax and margin examples come from the calculators on this site. No level of government runs or endorses this site.
Frequently asked questions
How long must I keep business records in Canada?
The CRA says six years from the end of the last tax year they relate to, unless it gives permission to destroy them earlier.
Can I keep records electronically?
Yes. The CRA accepts paper, electronic or a mix, and expects backup copies of electronic files.
Which records may need to be kept longer?
Records on long-term purchases and sales of property, the share registry and history that affects a sale or wind-up of the business may need to be kept indefinitely.
Is sales tax part of my income?
No. GST/HST you collect is owed to the government if you are registered, so record it on its own line.
How do I choose a bookkeeper or software?
We could not verify prices or features for any product. Check for an audit trail, easy export and separate sales tax reporting, and get fees in writing.
- 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