How Long To Keep Bookkeeping Records?
Posted On: 22/02/22 - 0

bookkeeping

Whether you operate as a sole proprietor, or have a corporation, every business needs to keep reliable, accurate bookkeeping records.

A Few Reasons Why You Should Have Accurate Records

One reason for having reliable bookkeeping records is to help you run a profitable business. If you are not profitable, you will not be in business for long. Having books in good order also helps to minimize your tax liabilities. Another positive is it helps you to keep your accounting and bookkeeping fees down if you outsource this service. It makes it easier for you to be tax compliant with the CRA. Having accurate up to date books also helps you to make educated business decisions that is good for the company You will also be more protected for those challenging economic times. By being more informed you will have a better handle on your payables and receivables which will help to keep your stress down.

Bookkeeping must be kept in order to calculate taxes payable.  Books and records must be supported by “source documents” which support the amounts in the books.  The CRA wants you to keep all supporting documents for six years, in case they select your return for review.  They may request more data than official receipts as proof of deductions or credits claimed. This could include cancelled checks or even bank statements.  It would be wise to store/backup documents for six years after the date on the notice of assessment or notice of reassessment.

Source documents include invoices for purchases and sales, deposit slips, checks, contracts, and sales.  These books and records are also used to prepare financial statements for the business.

Corporate Records

Some corporate records must be kept until two years after the day the corporation is dissolved.  These records include minutes of meetings of the directors and shareholders. Details on ownership of the shares of the corporation. The general ledger and book of final entries need to be kept.

The books and records may only be destroyed earlier than this with the permission of the CRA.  This can be requested by filing CRA’s form T137

It may be beneficial to seek the help of an accountant  or bookkeeper to set up your books when you first start your business.  After that, even if you are able to do your own bookkeeping and tax returns, having them reviewed by your accountant can often save you money and avoid future problems.

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