Keeping accurate business records is required by law and helps you manage your finances with confidence. Good records allow you to support your income and expense claims and stay prepared if your information is reviewed later. This guide explains what records to keep and how to organize them in a clear and practical way.
What Are Business Records?
A business record is any document or proof that shows details of your transactions. This can include invoices, receipts, agreements, statements, and even digital files. Records may exist in written, electronic, or visual form, as long as they contain useful information about your business activities.
General Record-Keeping Guidelines
You should keep a daily record of your income and expenses. There is no required format, so you can choose a method that suits your needs. Some people prefer notebooks with columns, while others use spreadsheets or accounting software.
It is important to keep supporting documents such as bank statements, deposit slips, and cancelled cheques. If you run more than one business, maintain separate records for each one. If you use a digital system, make sure the information is clear and easy to read.
Do not send your records with your tax return. Keep them stored safely so they are available if requested later.
Income Records
Understanding Gross Income
Gross income is the total amount your business earns before subtracting any expenses. This includes all sales and earnings, regardless of how you receive them.
What to Record
Each income entry should clearly show the date, the amount, and where the income came from. You must record income whether it is received in cash, property, or services.
Supporting Documents
Every income entry should be backed by original documents. These may include sales invoices, receipts, cash register tapes, deposit slips, fee statements, and contracts. These documents act as proof that the income was received.
Special Notes
Farmers should also keep cash purchase tickets for grain sales and cheque stubs from marketing boards. Fishers should keep sales slips for each landing, trip settlement sheets, and records of sales made to customers or businesses.
Example
If you sell a product for 500 dollars in cash, record the date, the amount, and the source. Keep the receipt or invoice as proof of the transaction.
Expense Records
Why Expense Records Matter
Expense records help you track business spending and support your claims when filing taxes.
What Receipts Should Include
Receipts should show the purchase date, the name and address of the seller, the name and address of the buyer, and a clear description of the goods or services. If the purchase is 100 dollars or more before tax and the seller is registered for GST or HST, the receipt should also include the vendor’s business number.
When Information Is Missing
Sometimes a receipt does not include a full description, such as a cash register tape. In that case, you should write the details on the receipt or record them in your expense journal.
If a seller does not provide a receipt, you should write down the seller’s name and address, the amount paid, the date, and a description of the purchase. This ensures you still have a record of the expense.
Property Records
What to Keep Track Of
You should maintain records of any property you buy, sell, or trade for your business.
For Purchases
Record who sold you the property, how much it cost, and the date of purchase. This information is needed to calculate deductions such as capital cost allowance.
For Sales or Trade-Ins
When you sell or trade property, record the date and the amount you received or were credited. This helps determine gains or losses.
Step-by-Step Record-Keeping Approach
Start by recording all transactions daily. Keep all supporting documents in an organized manner. Group your records into categories such as income, expenses, and property. Review your records regularly to ensure they are complete and accurate.
Practical Tips
Choose a system that you can maintain consistently. Label documents clearly so they are easy to find later. Store records in a safe place and keep backups if you use digital files. Regular checks will help you avoid missing information.
Keeping accurate business records is both a legal responsibility and a practical way to stay in control of your finances. By maintaining clear and organized records of income, expenses, and property, you can support your claims and handle your business operations with confidence.