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Reconciled bookkeeping means every line in your books has been matched to a bank, card or supplier statement, and the balances agree at the end of the period. Most small businesses do it monthly, when the statements arrive. Skip it and the mistakes pile up until year end.
What does it mean to reconcile your books?
Your bookkeeping file says what you think happened. The bank statement says what did. Reconciling is comparing the two, line by line, and explaining every difference.
Most gaps are dull. A cheque you wrote hasn’t cleared. A customer paid on the 31st and the bank posted it on the 2nd. A fee came out that nobody recorded. Then there are the ones that matter: a payment entered twice, a personal expense that landed in the business account, a deposit you can’t identify.
What does a monthly reconciliation look like?
Picture Marc, who runs a small landscaping outfit in Moncton. On the 3rd of each month he downloads the bank statement and ticks off every line against his books. Whatever isn’t ticked is a question. That unticked pile is usually five or six items, and clearing it takes under an hour. Wait until March and the same pile is sixty items, half of them forgotten.
The habit matters more than the tool. A spreadsheet works, accounting software works, a bookkeeper works. What doesn’t work is a statement left unopened for three months.
How a reconciled entry looks
Say you buy $2,500 of equipment in Ontario. The GST/HST calculator shows $325.00 of HST at 13%, so the supplier’s total is $2,825.00. That’s the number on the bank statement. Your books should show it in two parts: $2,500.00 for the equipment and $325.00 of tax you may be able to claim back.
If you booked $2,825.00 as the equipment cost, the bank still matches and the account still balances. But the tax claim is wrong. That’s why reconciling the bank isn’t enough on its own. You also check that each amount went into the right account.
| Check | What you compare |
|---|---|
| Bank account | Books against the statement, ending balance |
| Credit card | Charges and payments against the card statement |
| Sales tax | Tax collected and paid against the return |
| Payroll | Amounts sent to the CRA against payroll records |
| Loans and owner accounts | Balances against lender or owner records |
What do the CRA’s record rules say?
The CRA expects adequate records that are kept organized. The general rule is to keep required records and supporting documents for six years from the end of the last tax year they relate to. Some records, such as those on property and share registers, are kept longer. If you file late, the six years start from the filing date.
You need the CRA’s written permission before you destroy records early, using Form T137 or a written request. The CRA says failing to keep records as required could lead to prosecution. Reconciled books make all of this easier, because each entry points to a document that’s still there.
What to ask a bookkeeper who says they reconcile
This site can’t tell you which bookkeeper to hire or what one costs. No fee levels or product claims were confirmed, so none are made. Here’s what you can ask, though.
- Which accounts do you reconcile, and how often?
- What do I get to see afterward, a signed-off statement or just the ledger?
- Who fixes an error you find in a past month?
- Where are the source documents kept, and can I reach them?
Software can pull bank feeds in and suggest matches. That saves typing. It doesn’t decide whether a $325 charge is tax or a personal expense, so someone still has to look.
Mistakes that break a reconciliation
Opening balances that don’t match last year’s file. Transfers between your own accounts counted as income. A refund entered as a new sale. And the big one: forcing a balance with a plug entry, which hides the error instead of finding it.
If you pay staff, the reconciliation should tie back to the remittance. Our payroll remittance calculator shows $961.03 to send per pay period for one employee paid $3,000 every two weeks in Ontario, and that amount should appear in your bank and your payroll records. For a quick check on whether sales cover costs, the profit margin calculator turns a $60 cost and a $100 price into a 40% margin. To see what a profit turns into after tax, try the corporate tax calculator.
One more tip for tax time: if a few bucks won’t reconcile after an honest hunt, write the difference down with a note and move on, but never let it grow quietly month after month.
Official page on this topic: Canada Revenue Agency: Keeping records.
The sources behind this page
The record-keeping rules come from the CRA‘s page on where to keep records, for how long and how to request permission to destroy them early, read on 30 September 2026, then rechecked against the CRA’s RC188 guide and Information Circular IC78-10 in November 2026. The tax and payroll figures come from the calculators on this site, using 2026 rates. This page describes the practice in general and doesn’t speak for the CRA.
Frequently asked questions
What is reconciled bookkeeping?
It means each entry in your books has been matched to a bank, credit card or supplier statement, and the ending balances agree. Every difference is explained, such as an uncleared cheque or an unrecorded fee, instead of being hidden with a plug entry. Reconciled books make year end and sales tax returns much easier.
How often should I reconcile my books?
Monthly suits most small businesses, since bank and card statements arrive monthly. Do it before you file a GST/HST return or send payroll remittances, so the figures on those filings match your records. A short monthly check takes far less time than sorting out a whole year in March.
How long do I keep records in Canada?
The CRA’s general rule is six years from the end of the last tax year the records relate to. If a return is filed late, the six years run from the filing date. Some records, such as a corporation’s share register, are kept until two years after dissolution. Check IC78-10 for your case.
Can I destroy old records early?
Only with the CRA’s written permission, which you can request on Form T137, Request for Destruction of Records, or in a letter to your tax services office. Without that permission, wait out the six years. The CRA says failing to meet the retention rules could lead to prosecution, so keep the originals.
Do bank feeds do the reconciling for me?
They import transactions and suggest matches, which saves typing. You still need to check that each amount went to the right account, including sales tax. A feed cannot tell whether a $325 charge is HST you can claim or a personal expense, so someone has to review the matches.
- 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