CRA BUSINESS RECORDS
WHAT IS A RECORD
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CRA Business Records Requirements
Understanding CRA business records requirements helps businesses maintain the accounting and supporting documents needed to substantiate income, expenses, tax filings and other financial activity.
Good recordkeeping is not limited to keeping receipts. The records should provide enough information to explain transactions and support the amounts reported to the Canada Revenue Agency.
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Xpress Accounting helps Ontario businesses organize and maintain financial records that support bookkeeping, tax preparation and ongoing compliance.
Depending on the business, those records can include accounting ledgers, invoices, receipts, banking information, contracts, payroll documentation, GST/HST records and electronic transaction information.
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The CRA requires records to be reliable and complete, contain the information necessary to determine tax obligations and credits, and be supported by documentation. Businesses must also be able to make their records available when the CRA asks to examine them.
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Maintaining those records as transactions occur is considerably easier than attempting to reconstruct several years of business activity after information has been lost.
CRA Business Records
What Does the CRA Consider a Business Record?
A business record can take many forms.
Accounting books, ledgers and financial statements are records, but the CRA's definition extends well beyond reports produced by bookkeeping software.
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Supporting documents can include sales invoices, purchase receipts, contracts, bank statements, deposit slips, cancelled cheques, credit-card receipts, work orders, delivery slips, logbooks, emails and correspondence relating to transactions.
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The important principle is that the financial records and supporting documents work together.
An accounting entry may establish that an amount was recorded as an expense.
An invoice or receipt can provide evidence about what was purchased. The bank or credit-card record can then provide information about the payment. Together, these records create a more understandable history of the transaction.
Why Businesses Need Supporting Documents
Bookkeeping records summarize financial activity, but an entry in accounting software does not necessarily provide all the evidence required to explain a transaction. Consider a payment appearing on a corporate credit card.
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The card statement can establish the merchant, date and amount. It may not establish precisely what the company purchased or why the transaction relates to the business.
The underlying invoice or receipt can provide that additional information.
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Supporting documents become particularly important when the nature of a transaction cannot be determined from the movement of money alone. Financing, asset purchases, shareholder transactions and unusual expenses can all require information beyond a bank-feed description.
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The CRA states that business records must contain enough detail to determine tax obligations and entitlements and that source documents may be required to support those records.
Income Records for a Business
Businesses should maintain records capable of identifying their sources of income. Sales activity can be documented through invoices, sales reports, contracts, point-of-sale information and other records appropriate to the operation.
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Payments may subsequently arrive through several channels. A customer might pay by electronic transfer, cheque, credit card or another payment platform. The amount deposited into the bank can also differ from the original transaction where processing fees or other adjustments are deducted before settlement.
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For this reason, bank deposits alone do not always provide a complete sales record.
The CRA notes that complete records help establish sources of income and can also help determine GST/HST treatment. Maintaining identifiable sales records gives the business a clearer connection between the revenue earned and the amounts ultimately received.
Expense Records and Receipts
Business expenses should be supported by records showing what was purchased and the amount involved. Purchase invoices and receipts are common supporting documents. Other information may also be relevant depending on the transaction, including contracts, payment records and correspondence.
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The bookkeeping should then connect those documents with the appropriate financial activity.
This is preferable to relying solely on merchant descriptions appearing in bank or credit-card feeds.
A merchant may sell several types of products or services, and a shortened transaction description does not necessarily explain the business purpose of a purchase.
Organized expense documentation can also help preserve information required for GST/HST purposes where applicable.
Records for Business Assets and Property
Significant business purchases can require records extending beyond an ordinary receipt.
Vehicles, equipment, computers, machinery and other property can continue to affect accounting and tax information after the year in which they were acquired.
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Purchase invoices and agreements can establish the original transaction. Where an asset is financed, loan or financing documents can provide additional information about how the purchase was funded and how subsequent payments relate to the arrangement.
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Records relating to long-term property can also require retention beyond the ordinary six-year period in some circumstances. CRA guidance identifies records concerning long-term acquisitions and disposals of property and certain other historical information affecting a sale, liquidation or wind-up as records that may need to be kept indefinitely.
Bank and Credit-Card Records
Bank and credit-card records form an important part of a business's financial documentation.
Statements provide an external history of deposits, withdrawals, purchases, transfers and payments. They are also essential to account reconciliation.
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A bookkeeping balance can appear reasonable while still containing missing or duplicated transactions. Comparing the accounting records with external statements helps identify those differences. The CRA specifically identifies records such as bank statements, deposit slips, cancelled cheques and credit-card receipts among the documents that can support business transactions.
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Businesses should therefore maintain access to historical financial statements rather than assuming accounting-software entries make the original banking information unnecessary.
How Long Should Business Records Be Kept?
The general CRA rule is that required records and supporting documents must be retained for six years from the end of the last tax year to which they relate. The meaning of the tax year depends on the taxpayer.
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For corporations, it is the corporation's fiscal period. For individuals, it is the calendar year.
The phrase “last tax year to which they relate” is important. The appropriate retention period is not always determined simply by looking at the date printed on a document.
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Some records continue to affect later tax periods, while special circumstances can require longer retention. Businesses should therefore avoid implementing a simple automatic deletion policy based only on a document's age.
When Records Need to Be Kept Longer Than Six Years
Six years is a general rule, not permission to destroy every business document as soon as it reaches its sixth anniversary. The CRA identifies several situations in which records need to be retained longer.
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Certain records concerning long-term acquisitions and disposals of property, share registries and historical information affecting the sale, liquidation or wind-up of a business are to be retained indefinitely.
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The CRA can also require a taxpayer to retain particular records beyond the ordinary period.
Late-filed returns affect the calculation as well: where an income tax return is filed late, the CRA says the supporting records must be kept for six years from the date the return is filed.
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Records relevant to an objection or appeal must also be retained until the applicable retention conditions have been satisfied.
Can Business Records Be Kept Electronically?
Yes. Business records can be maintained electronically, but electronic recordkeeping carries its own responsibilities. The CRA requires electronically maintained records to remain accessible and readable for the required retention period. Having printed copies does not necessarily remove the obligation to retain the underlying electronic records where the records originated electronically.
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Electronic records can arise from accounting software, point-of-sale systems, online transactions and other computerized business systems. Businesses should also maintain appropriate backups. Changing accounting software or computer systems does not remove the obligation to retain required historical information.
A business planning a software migration should therefore consider how earlier accounting information will remain accessible after the previous system is no longer used.
Scanned Receipts and Electronic Documents
Modern businesses frequently receive invoices and receipts electronically or convert paper documentation into digital form. The important issue is not simply whether the document appears on a computer screen.
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The recordkeeping system needs to preserve information in a form capable of meeting the CRA's requirements. Electronic business records must remain accessible and readable, and businesses remain responsible for protecting their records even when third-party systems are used to store them.
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A consistent filing process can make digital documentation considerably more useful. Rather than accumulating thousands of unidentified files, businesses can organize documents by supplier, account, transaction or accounting period according to a system appropriate for their operation. The objective is to be able to retrieve supporting information when it is needed.
Records Stored by Bookkeepers and Cloud Providers
Using a bookkeeper, accountant, payroll provider or cloud-software company does not transfer the business owner's recordkeeping responsibility to that third party. The CRA specifically states that taxpayers remain responsible for protecting their records even when someone else holds them.
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This has practical consequences. A business changing accounting providers should make sure it retains access to the records required for previous periods. The same principle applies when changing software. Information stored in an old system should not simply become inaccessible because a subscription ends or a new accounting platform is introduced.
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Businesses should understand where their financial records are stored, how they can be retrieved and what will happen to them when a service relationship changes.
Where Business Records Must Be Kept
CRA guidance states that required records generally need to be kept at the business's place of business or residence in Canada unless the CRA provides written permission for them to be kept elsewhere. This requirement is particularly relevant to cloud-based and international recordkeeping arrangements.
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The CRA specifically notes that records stored outside Canada and merely accessed electronically from Canada are not considered records kept in Canada. Businesses using international software or storage arrangements should therefore understand where their required records are actually being maintained.
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Record location is separate from whether a business owner can personally view the information from an Ontario computer.
GST/HST Records Businesses Need to Keep
GST/HST registrants need records that support the information reported on their returns.
The records must allow the business to calculate GST/HST payable or collectible and amounts that may be refunded, rebated or deducted from net tax. Where input tax credits are claimed, purchase invoices or receipts need to be retained to support those claims.
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Sales and purchase documentation should also provide sufficient information to determine how GST/HST applies to the transaction. This makes transaction-level bookkeeping particularly useful. Separating the underlying sale or purchase from the GST/HST component creates a clearer accounting history than recording only the amount that entered or left the bank.
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Businesses needing broader information about GST/HST responsibilities can review our Ontario HST guide.
Records After HST Registration
A newly registered business needs to begin maintaining GST/HST information consistently from its effective registration date. Sales records should identify applicable tax collected, while eligible purchase documentation can become important when input tax credits are claimed.
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The transition is easier when the underlying bookkeeping was already organized before registration. A business approaching mandatory registration should therefore avoid waiting until its first GST/HST return to determine whether it has retained appropriate sales and purchase records.
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Businesses that need information about thresholds, voluntary registration and effective dates can review our HST registration guidance.
Payroll Records Employers Need to Keep
Employers have additional recordkeeping requirements. Where income tax, CPP contributions or EI premiums are deducted from remuneration, CRA guidance requires payroll records to include information such as employee hours and amounts withheld for CPP, EI and income tax.
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Employers also need to retain documents including employee TD1 forms, applicable CRA letters of authority, information slips issued and returns filed, along with other required payroll information. Payroll records should also connect with the company's accounting records.
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Employee payments, employer amounts and remittances affect the financial history of the business and should be identifiable within the bookkeeping. Ontario employers requiring ongoing payroll assistance can learn more about our payroll services in Ontario.
Internet and E-Commerce Transaction Records
Businesses operating online have recordkeeping responsibilities for their Internet-based transactions as well. The relevant information can include records generated during transaction processing, such as sales-confirmation emails or web logs, as well as information created through security processes that preserve the authenticity and integrity of electronic transactions.
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Using a third-party platform does not eliminate the responsibility. The CRA warns that businesses should retain required transaction information because outside service providers may not keep it for the full legally required period. This is particularly important where an online platform contains information not reproduced completely in the business's accounting system.
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Businesses should know what data needs to be exported or otherwise preserved before closing or changing a platform.
Records for Incorporated Businesses
Corporations should maintain records that preserve the financial history of the incorporated entity. Corporate bank accounts, revenue, expenses, assets, liabilities and shareholder activity should remain identifiable within the corporation's records.
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This continues to matter even where a corporation becomes inactive. The CRA specifically states that holding companies and inactive corporations still have recordkeeping responsibilities. Corporate records also carry information forward between fiscal periods.
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Assets and liabilities do not disappear merely because a new fiscal year begins. Historical documentation can therefore remain relevant when an amount continues to affect the corporation's financial position. Organized records provide a stronger foundation for year-end accounting and corporate tax preparation.
What Happens to Records When a Corporation Is Dissolved?
Dissolution does not mean all corporate records can immediately be destroyed. Current CRA guidance states that when a corporation is dissolved, its records and supporting documents used to verify tax obligations and entitlements, together with other required corporate records, generally need to be retained for two years after the date of dissolution.
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Other records can be subject to different requirements, particularly historical information that must be retained indefinitely. Corporations considering dissolution should therefore determine which records remain subject to retention requirements rather than disposing of their accounting files when operations cease.
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Where corporations amalgamate or merge, the new corporation generally assumes responsibility for maintaining the business records of the predecessor corporations for the applicable period.
Business Records and Corporate Tax Preparation
Corporate tax preparation depends on information accumulated throughout the corporation's fiscal year. Revenue and operating expenses form part of that history, but so do assets, financing, payroll and transactions involving shareholders.
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Supporting documentation provides context when an accounting entry alone cannot explain what occurred. For example, a bank deposit might represent revenue, borrowed funds or money contributed by a shareholder. Those transactions should not be treated identically merely because cash entered the corporation's account.
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Maintaining supporting information throughout the year makes these distinctions easier to establish during year-end accounting. Ontario corporations requiring assistance with their return can review our corporate tax return guidance.
Business Records During a CRA Review or Audit
Organized records become particularly important when the CRA asks a business to substantiate information. Taxpayers are responsible for making required records and supporting documents available to the CRA. The CRA may inspect or examine records, business processes and property, and businesses are expected to provide reasonable assistance during an examination.
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Incomplete records can make that process more difficult. The CRA notes that where auditors cannot determine income or taxable revenue because records are incomplete, other methods may be used to establish the amounts. Claims that are not supported can also be disallowed.
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Businesses dealing with documentation problems should therefore organize the available information rather than assuming that accounting reports alone will answer every question.
What If Business Records Are Incomplete?
Missing records should be addressed as soon as the problem is identified. The appropriate response depends on what is unavailable. Bank and credit-card statements can sometimes help reconstruct financial activity. Suppliers may be able to provide copies of invoices, while payroll systems and payment platforms may contain historical reports.
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Reconstructing the bookkeeping does not necessarily replace every missing source document, but it can help establish what transactions occurred and identify where additional information is required. Where the accounting records themselves are inconsistent or unreconciled, Xpress Accounting provides accounting cleanup services in Ontario to help businesses investigate and correct existing bookkeeping problems.
Building a Practical Business Recordkeeping System
A useful recordkeeping system does not need to make routine bookkeeping unnecessarily complicated. The system should allow transactions to be recorded consistently and supporting documents to be retrieved when needed.
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Sales records should connect with revenue. Purchase documents should support expenses and significant acquisitions. Bank and credit-card statements should remain available for reconciliation.
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Payroll and GST/HST information require their own supporting detail where those obligations apply. Electronic records also need appropriate preservation and backup. The result should be a financial history that another person can reasonably follow rather than a collection of disconnected statements, receipts and accounting entries.
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Businesses that need ongoing assistance maintaining their transaction records can learn more about our bookkeeping services in Ontario.
Business Recordkeeping Support From Xpress Accounting
Xpress Accounting helps Ontario businesses maintain accounting records that remain organized, understandable and connected with their supporting financial information.
The appropriate recordkeeping process depends on how the business operates.
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A small professional corporation may have relatively few monthly transactions but still require careful documentation of shareholder activity and corporate expenses. A larger operating company may need to coordinate sales information, supplier invoices, payroll, HST and several financial accounts.
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The objective is to establish records that support the company's ongoing bookkeeping and provide usable financial information when tax filings, year-end accounting or CRA documentation are required.
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Businesses that need help improving their accounting records can contact Xpress Accounting.
Frequently Asked Questions
Q: How long does the CRA require businesses to keep records?
A: Generally, required business records and supporting documents must be kept for six years from the end of the last tax year to which they relate. Different periods can apply in certain circumstances, including some property and historical records, late-filed returns, objections and appeals, and dissolved corporations.
Q: Does the CRA accept electronic business records?
A: Yes. Electronic records are acceptable, but required electronic records must remain accessible and readable for the applicable retention period. Businesses are also responsible for appropriate preservation and backup of their electronic information.
Q: Do businesses need to keep receipts if transactions are in accounting software?
A: Accounting entries do not necessarily replace the supporting documents required to substantiate transactions. The CRA requires records to be supported by documentation, and invoices or receipts can also be required to support GST/HST input tax credit claims.
Q: Who is responsible for records if a bookkeeper stores them?
A: The business remains responsible for protecting required records even when a third party holds them. Businesses should maintain appropriate access to historical records when changing bookkeepers, accountants, software or other service providers.
Maintain Business Records Before They Become a Problem
Business records serve several purposes at the same time. They provide the transaction history used for bookkeeping, support income and expenses, contribute to GST/HST and payroll reporting where applicable and provide documentation when financial information needs to be examined later.
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The general six-year retention period makes long-term organization important. Electronic systems can simplify storage, but businesses still need to ensure required information remains accessible, readable and appropriately backed up.
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Recordkeeping becomes most difficult when documentation is addressed only after a tax filing, year-end problem or CRA request exposes what is missing. Xpress Accounting helps Ontario businesses establish and maintain accounting records that can support their ongoing financial and tax responsibilities.
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Businesses looking for assistance with their accounting records can request an accounting consultation.