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Canadian accounting principles are the rules in the CPA Canada Handbook, set by the Accounting Standards Board. Which part applies to you depends on who you are: a public company uses IFRS, most private businesses use the Part II standards known as ASPE, and charities and pension plans have parts of their own.
Which accounting principles does Canada actually use?
People say “Canadian GAAP” as if it were one book. It’s a set of frameworks under one roof, and the Handbook is split into parts so that each kind of organization follows the one built for it. The Wikipedia entry on the Accounting Standards Board describes the board’s separate frameworks for public companies, private enterprises and not-for-profits.
| Handbook part | Framework | Who it’s written for |
|---|---|---|
| Part I | IFRS | Publicly accountable enterprises |
| Part II | ASPE (Accounting Standards for Private Enterprises) | Private enterprises |
| Part III | Accounting standards for not-for-profit organizations | Charities and other not-for-profits |
| Part IV | Accounting standards for pension plans | Pension plans |
If you run a small corporation, your accountant is almost certainly working from Part II. Ask them which framework the statements follow. It’s one question and it tells you what rules sit behind every number.
What do the core principles say in plain words?
The frameworks differ in detail, but the ideas underneath are the same ones bookkeepers have used for a long time. Here are the ones you’ll run into.
Going concern means the statements assume the business will keep operating. If it won’t, the numbers look different.
Accrual accounting means you record a sale when you earn it and a cost when you incur it, whether or not cash moved that day. A January invoice paid in March is still January revenue.
Matching says costs belong in the same period as the revenue they helped produce. Consistency says you don’t switch methods every year to flatter the result. Prudence, in everyday terms, means you don’t record a profit you haven’t earned yet, but you do account for a likely loss early.
Substance over form means a transaction is recorded for what it really is, not what the paperwork calls it. A “lease” that works like a purchase can be treated like one.
What does accrual look like on a real invoice?
Say Nadia runs a design studio in Ontario and bills a client $2,000 plus 13% HST on January 20. The client pays $2,260 on March 10. Under accrual accounting, the $2,000 is January revenue, even though no cash arrived until March. The $260 of HST isn’t revenue at all. It’s tax she’s holding for the government. On a cash basis, the same job would show up in March. Neither view is wrong. They answer different questions, which is why your accountant needs to know which one the statements use.
Is accounting profit the same as taxable income?
No, and this is where owners get caught. The CRA works from the Income Tax Act, not from the Handbook. Its own guidance for businesses that report under IFRS says they must keep extra documents that reconcile the financial statements to the amounts on their tax return.
So a business can show one profit in its statements and a different taxable income on the T2. The gap comes from tax rules that treat certain items their own way. Depreciation is the classic one: the books follow the accounting standard, and the tax return follows the tax rules for claiming the cost of equipment.
Take a sole proprietor with $80,000 of net business income in Ontario. The self-employed tax calculator puts income tax at $13,233.57 and CPP at $8,892.90, which leaves $57,873.53. Add $2,000 in the calculator’s deductions box and the income tax falls to $12,640.57, a saving of $593. That deductions box only reduces income tax (the CPP figure doesn’t move) and the calculator leaves out EI, so treat it as a rough guide, not a filing.
Where do these principles show up in a small business?
Mostly in three places. Your bookkeeping records, your year-end financial statements, and the reconciliation between those statements and your tax return.
Corporations also meet them in the rules for sales tax. If you register for GST/HST, the amounts you collect and claim have to tie back to your books. A quick check with the GST/HST calculator shows the pattern: $100 before tax becomes $113.00 in Ontario, and the $13.00 isn’t your revenue. It’s tax you hold for the government.
Margins are the other everyday use. If your statements say you earned $30,000 on $120,000 of sales, the profit margin calculator turns that into a 25% margin you can compare from year to year, as long as you kept the same accounting policies throughout.
What mistakes come up most often?
Mixing cash and accrual is the big one. An owner tracks bank deposits all year, then hands over a shoebox and expects statements that follow the accrual rules. The accountant has to rebuild the year, and that takes time you pay for.
Another: treating owner spending as a business cost. A personal purchase on the company card isn’t an expense under any framework.
And a quieter one. Assuming “GAAP compliant” means “tax compliant”. It doesn’t. A corporation still has to file its T2 within six months of its tax year-end, whatever its statements look like, and the CRA’s page on when to file shows how to count those six months.
Which framework your own business must use isn’t something this page can tell you. That depends on your public status, who reads your statements (a lender, an investor, a shareholder agreement) and what your accountant advises. The Handbook itself is paywalled, so the parts above come from the standard-setter’s and CPA Canada’s public descriptions.
Where we got these figures
The framework structure comes from the Accounting Standards Board and CPA Canada, which publish the Handbook. The six-month T2 filing rule and the IFRS record-keeping guidance come from the Canada Revenue Agency, read in October 2026. The calculator figures use our 2026 data tables for federal and Ontario tax and CPP.
Frequently asked questions
What is Canadian GAAP?
It's the set of accounting frameworks in the CPA Canada Handbook, set by the Accounting Standards Board. Different parts cover public companies, private enterprises, not-for-profits and pension plans.
What is ASPE?
ASPE means Accounting Standards for Private Enterprises, Part II of the Handbook. Most privately held Canadian businesses use it.
Do public companies use ASPE?
No. Publicly accountable enterprises report under IFRS, which is Part I of the Handbook.
Does the CRA follow accounting standards to work out tax?
It follows the Income Tax Act. Your financial statements are a starting point, and the CRA expects you to be able to reconcile them to your return.
When is a corporation's T2 due?
Within six months of the end of its tax year. A March 31 year-end gives you September 30.
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