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What books and records must be kept for a business?
Any person (individual, partnership,
corporation, trust, etc.) carrying on a business must keep books
of accounts and records which provide the ability to calculate
taxes payable. These books and records must be supported by
"source documents" which substantiate the amounts in the books
of account. Source documents include (but are not limited to)
invoices for purchases and sales, deposit slips, cheques, bank
statements, work orders, cash register tapes, purchase orders
and receipts, credit card receipts and statements, contracts,
guarantees, email and general correspondence, financial
statements, tax records, ledgers, journals, log books,
appointment books, spreadsheets and accountants’ working papers
and contracts. Your records are used in determining your tax
liabilities and you must be able to support your claims in the
event of an audit. The onus of proof is on the taxpayer and
unsupported claims may be denied.
For purposes of
income tax, many books of accounts, records, and source
documents have to be retained for a minimum of six years after
the end of the last tax year to which they relate. In the case
of records regarding capital purchases, the last tax year to
which they relate would be much later than the acquisition date.
It would be the tax year in which a disposal of the capital
property occurred, because the purchase records would be
required to calculate the gain or loss on disposal. Thus,
records regarding capital property should normally be kept until
six years after the end of the tax year in which the capital
property was sold.
Some books and
records of the business of a person (other than a corporation)
must be retained until six years after the tax year in which the
business ceased. These books and records include, according to
Regulation 5800:
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(i) the
general ledger or other book of final entry containing the
summaries of the year-to-year transactions of the business,
and
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(ii) any
special contracts or agreements necessary to an
understanding of the entries in the general ledger or other
book of final entry referred to in paragraph (i)
Some corporate
records must be kept until two years after the day the
corporation is dissolved. These records include:
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(i) minutes
of the meetings of directors of a corporation,
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(ii) minutes
of meetings of the shareholders of a corporation,
-
(iii) any
record of the corporation containing details with respect to
the ownership of the shares of the capital stock of the
corporation and any transfers thereof,
-
(iv) the
general ledger or other book of final entry containing the
summaries of the year-to-year transactions of the
corporation, and
-
(v) any
special contracts or agreements necessary to an
understanding of the entries in the general ledger or other
book of final entry referred to in paragraph (iv).
The books and
records may only be destroyed earlier than this with the
permission of the Minister. This can be requested by filing Form
T137, Request for Destruction of Books and Records. Further
information is available on this topic on the Canada Customs and
Revenue Agency (CRA) web site, from Information Circular
78-10R3. |
