Bookkeeping and accounting

What monthly bookkeeping actually buys

Transactions categorised, bank and credit card accounts reconciled, source documents filed against the entries they support, and a set of books that closes each month rather than being reconstructed each spring. The output is not the ledger; it is that the year-end becomes a review instead of an excavation, and that the numbers are available in the month they describe rather than nine months later when nothing can be done about them.

Two things separate books that hold up from books that do not. Sales tax is tracked as two taxes where two apply — in British Columbia, 5% federal GST and 7% provincial PST are separate registrations with separate returns, and holding both in one account makes the GST return wrong and the PST return unverifiable. And money the owner takes out lands in one shareholder loan account rather than scattered across expense codes, so the year-end decision about salary, dividends or repayment is made once, deliberately, against a number that is already correct. Monthly bookkeeping covers the engagement, and the shareholder loan tracker keeps that one account visible.

Payroll is a deadline business, and the liability is personal

Once a corporation pays anyone, including its own owner, it withholds CPP, EI and income tax from each pay and remits on the schedule CRA assigns to its payroll account. T4, T4A and T5 slips are then due by the last day of February following the calendar year they cover. Those dates do not move for a small employer, and the filing penalties apply per slip.

The part owners tend not to know: directors can be held personally liable for source deductions the corporation withheld and did not remit. Unlike most corporate debts, that one reaches through the company. It is the single strongest argument for treating payroll as a scheduled obligation rather than something handled when cash allows. Payroll services covers the running of it, and the remittance calendar lists the dates.

Year-end statements, and the level you actually need

Three levels of assurance exist and they are not interchangeable. A compilation engagement under CSRS 4200 produces statements a CPA assembles from information you supply, accompanied by a communication stating plainly that no audit or review assurance is provided. A review engagement gives limited assurance from enquiry and analysis. An audit gives reasonable assurance and involves testing and confirmations.

For an owner-managed Canadian private company with no outside investors and no statutory requirement, a compilation is the normal and appropriate choice. Requests frequently arrive worded as “audited financials” when the requester — a bank, a landlord, a procurement office — would accept considerably less. Establishing what is genuinely required before commissioning anything is the largest saving available in this whole area, because the three levels differ substantially in cost. Which engagement you need works through it.

Catch-up work, and what a backlog actually costs

A file that has slipped two or three years is common and it is fixable. It is also sequential: the oldest year has to be closed first because its closing balances are the next year’s opening balances, and a GST return cannot be filed on figures that later move. The cost is driven by how many months are missing and what state the records are in, not by how alarming the situation feels.

Catch-up is scoped and quoted separately from the ongoing monthly engagement, so you can see what clearing the backlog costs before deciding to start it, and decide about the two independently. Catch-up bookkeeping sets out how it runs, and the bookkeeping health check is a free way to see where a file actually stands.

What the records have to survive

As a general rule CRA expects business records to be kept for six years from the end of the tax year they relate to, and some — the ones tied to the eventual disposition of property or the winding up of a corporation — have to be kept well beyond that. Electronic records are acceptable, but they have to be readable and complete: a bank feed that categorised a transaction is not a receipt, and a photograph of a receipt is fine where the original is not.

This matters less on an ordinary year and entirely on the year a review letter arrives, because the answer to “show us” is either in the file or it is not. How long to keep business records covers the exceptions, and the audit document checklist lists what a request usually asks for.