What books and records must you keep for your business?
If you are carrying on a business in the form of a sole-proprietorship, partnership, corporation or a trust, etc. you must maintain books of accounts and records which allow you to calculate taxes payable. The reason you need to obtain these records or ‘source documents’ is to substantiate any amounts which are recorded is your books.
Source documents include the following:
- Invoices for purchases and sales
- Deposit slips
- Cheques
- Contracts
- Receipts
These documents along with bank, credit card and investment statements are utilized to prepare financial statements for the business.
The Canada Revenue Agency requires that any business maintain their books and records for a minimum of six years after the end of the tax year to which they relate. It is important to note that invoices for items such as capital purchases have to be kept for a longer term. Essentially these documents will be utilized to calculate gains or loss on disposition, therefore you should keep these until the capital items are disposed.
It can be of your benefit to seek the assistance of an accountant to set up your company and maintain your records when you first start your business. Subsequently even if you have the knowledge to maintain your own books and complete your tax returns a chartered accountant can review your records and returns to avoid any issues with the CRA and reduce your taxes.