As a Canadian entrepreneur, you must keep accurate financial records of all activities for your company for six years. Along with your financial statements (balance sheet, income statement, and cash flow forecast), you’re required to keep records for all the individual accounts that make up those statements.
What accounting records do I need to keep?
In Canada, the major accounting records that you must accurately keep are:
- Accounts Receivable: Who owes you, how much do they owe, and for how long have they owed you?
- Accounts Payable: Who do you owe, how much and for how long?
- Inventory: How much did you buy; when did you buy; and how much did you pay? How you account for your inventory will affect your cost of goods sold.
- Payroll: Total salaries paid to employees, payroll taxes and deductions.
- GST/HST and Provincial Sales Tax: All businesses with an income greater than $30,000 per year are required to collect and submit on behalf of the federal government a goods and services tax (GST) and, depending where your business operates, provincial sales tax (PST) or harmonized sales tax (HST).
- Cash: Cash inflows and outflows should be recorded to maintain proper control of cash.
- Fixed Assets: What you bought, how much you paid, and when you bought, along with depreciation amounts.
- Other Records: Such as insurance, leases, investments.
There’s lots of accounting software that’s easy to set up and use. You can ask your accountant for their advice on which program would be best for you and your business.
Keep in mind that, while software can be useful, outside accounting advice is important to small business success. Accountants see loads of businesses in different industries and can help you understand and manage the financial health of your company. They also remove some of your own stress and worry about overlooking important financial details. Win-win!