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Business bookkeeping comes down to one habit: write down every dollar in and out with a date, a name and a reason, then keep the proof for six years. The CRA doesn’t require a particular system. It requires records clear enough that someone else can rebuild your income and your claims from them.
What does the CRA want in your business bookkeeping?
For income, the record has to show the date, the amount and where the money came from. For an expense, it needs the date of the purchase, what you bought, and the name and address of the seller. A receipt should also name the buyer, and for purchases of $100 or more it should show the seller’s GST/HST number if they have one.
Paper and electronic records are both fine, as long as they’re clear and easy to read. You don’t send any of it in with your return. You keep it in case the CRA asks later.
Which documents go in the file?
| Type of record | What to keep |
|---|---|
| Sales | Invoices, cash register tapes, sales receipts |
| Purchases | Supplier receipts and invoices with the details above |
| Bank activity | Duplicate deposit slips, bank statements, cancelled cheques |
| Cash spending with no receipt | A note in your expense journal: seller, amount, date, what it was for |
| Retention | At least six years from the end of the last tax year the record relates to |
That last row surprises people. The six years start counting after the year the record belongs to, so a receipt from March 2026 stays until at least the end of 2032.
How often should you update the books?
Weekly is a good rhythm for most one-person businesses. Monthly works if you’re disciplined. Once a year, in April, is how people end up with a shoebox and a bad mood.
Do three things each time. Enter the new sales and purchases. Match your bank statement to your entries so nothing is missing or doubled. Tag each expense with the category you’ll need on the tax form, such as advertising, office supplies or insurance. Then the year-end job is a summary, not an excavation.
What does a bookkeeping error cost you?
Here’s a comparison with real figures. Take a freelancer in Ontario with $80,000 of net business income. The self-employed tax calculator shows about $22,126 of income tax plus CPP, or 27.7% of that income. Now say $10,000 of genuine expenses were never written down. Entered as $70,000, the same tool shows about $18,298. The gap is roughly $3,828 that you paid for lack of a receipt.
It works the other way too. A claim you can’t back up is a claim the CRA can refuse, and then you’re paying tax on money you spent.
Where does the tax side of your books lead?
Bookkeeping feeds three things. Your income tax and CPP on the T2125 (the self-employed tool is a quick check), your instalments if you owe enough each year (try the instalment calculator), and GST/HST if you’re registered. To see whether prices leave you a real profit, the profit margin calculator works from the same numbers.
If you run a corporation, the books also feed the T2 return, and the corporate tax calculator gives a rough estimate of what it might owe.
What the calculators leave out
The self-employed tool takes your net income, so it won’t add up your expenses for you. It also leaves out GST/HST and EI, and instalments may apply. Treat its result as an estimate to test against your books.
Which accounting method you use matters too, but we couldn’t confirm a CRA page that gives a simple rule for choosing, so ask the CRA or an accountant if you sell on credit and your income timing is uneven.
Where the numbers come from
Record rules come from the Canada Revenue Agency’s business records page and its guide RC188, Keeping Records, as read in September 2026. The tax figures come from our own calculator, which uses 2026 federal and Ontario rates.
Frequently asked questions
How long do I keep business records in Canada?
At least six years from the end of the last tax year they relate to, unless the CRA has said you can destroy them sooner.
Can I keep records on my computer?
Yes. Electronic records are fine if they're clear and easy to read.
Do I send receipts with my tax return?
No. Keep them in case the CRA asks to see them later.
What if I paid cash and got no receipt?
Note the seller's name, the amount, the date and what it was for in your expense journal.
Does the CRA require a certain bookkeeping system?
No. It doesn't require a specific one, so a spreadsheet, a notebook or software can all work.
- 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
Information only. This page is general information, not tax, legal or accounting advice. Tax-Services.ca is an independent publisher: we don't prepare or file tax returns or offer tax services, and we have no connection with the CRA, Revenu Québec, any government or any company named on this page. Check the figures that matter with an official source or a qualified professional.