Bookkeeping
Bookkeeping is the ongoing recording and classification of a business’s financial transactions, producing the records that tax filings, financial statements and sales-tax returns are built from.
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Key facts
| Category | Returns & filing |
|---|---|
| Produces | The transaction record behind the financial statements and every tax filing |
| Retention | Generally six years from the end of the last tax year the records relate to |
| Core controls | Bank, credit card and sales tax reconciliation |
| Feeds | GST/QST returns, payroll remittances, T2 and CO-17 |
| Authority | Canada Revenue Agency; Revenu Québec |
What it means in practice
Bookkeeping records what happened — invoices, receipts, payments, payroll, bank and credit-card activity — and classifies each item so that period totals mean something. Accounting then interprets those records. Canadian businesses must keep records and supporting documents for six years from the end of the tax year they relate to. Records held only in a cloud accounting tool still need to be retrievable and readable for that whole period. Weak bookkeeping is rarely just an administrative problem. It shows up as denied input tax credits on a sales-tax audit, as missed deductions at year-end, and as a corporate return that cannot be prepared without expensive reconstruction.
Reconciled or not is the only question that matters
Software imports transactions; it does not confirm they are complete or correctly classified. The test of whether books can be relied on is reconciliation — every bank and credit card account agreed to a statement, and the sales tax accounts agreed to what was actually filed and remitted. Unreconciled books fail in predictable ways. Duplicated bank feed entries overstate expenses. A capital purchase coded as an expense misstates both the deduction and the asset pool. Sales tax collected but posted to revenue understates the remittance and surfaces on audit with interest. What records must be kept is broader than the ledger: invoices, receipts, contracts and bank statements are all part of the requirement, and electronic records must remain readable for the retention period.
FAQ
How long do I have to keep records?
Is bookkeeping software enough on its own?
Need this applied to your situation?
A definition only gets you so far. Talk to a Montréal CPA about what this means for your return — in English or French.