What are records, who has to keep them and why it is important

On this page, you will find information on the following:

What are records

Records are organized accounting and financial documents that summarize your transactions and include the documents to support these transactions. These documents include:

  • ledgers
  • journals
  • books
  • charts
  • tables
  • financial statements
  • statements of accounts
  • income tax returns
  • goods and services tax/harmonized sales tax (GST/HST) returns
  • excise tax returns
  • sales invoices
  • purchase receipts
  • vouchers
  • contracts
  • guarantees
  • bank deposit slips
  • bank statements
  • cancelled cheques
  • cash register slips
  • credit card receipts
  • work orders
  • delivery slips
  • working papers
  • logbooks
  • emails
  • all correspondence that support your transactions

Who has to keep records

Here is the list of those who by law have to keep records:

  • persons who have to file a tax return
  • persons carrying on a business or engaged in commercial activity
  • persons who have to pay or collect taxes or other amounts such as payroll deductions and softwood lumber products export charge
  • persons who have to file a goods and services tax/harmonized sales tax (GST/HST) return
  • persons who apply for GST/HST refunds or rebates
  • payroll service providers
  • third-party record keepers
  • trusts
  • non-profit organizations
  • registered agents of registered political parties
  • official agents for candidates in a federal election
  • universities
  • colleges
  • municipal corporations
  • hospitals
  • school authorities
  • qualified donees such as:
    • registered charities
    • registered Canadian amateur athletic associations
    • registered housing corporations resident in Canada that are exempt from tax under Part 1 of the Income Tax Act because of paragraph 149(1)(i)
    • registered municipalities in Canada
    • registered municipal or public bodies performing a function of government of Canada
    • registered university outside Canada, the student body of which ordinarily includes students from Canada
    • registered charitable organizations outside Canada to which Her Majesty in right of Canada has made a gift

Notes

Holding companies and corporations that are inactive still have to keep records.

You have to keep separate records for each of the above situations.

Why keep records

The following are several ways that you can benefit from properly keeping records:

  1. Complete and organized records help identify the sources of your income and can help you decide if you should charge GST/HST. You may receive cash or property from many different sources. If you do not have records showing your income sources, you may not be able to prove that some sources are non-business or non-taxable for income tax purposes. You also need to have complete and organized records to show that your supplies are zero-rated or not subject to GST/HST.
  2. Complete and organized records can mean tax savings. Good records serve as a reminder of the expenses you can deduct and the input tax credits (ITCs) you may be eligible to claim. If you do not record your transactions, you may forget some of your expenses or ITCs when you prepare your income tax or GST/HST returns. For more information on ITCs, see Guide RC4022, General Information for GST/HST Registrants.
  3. Complete and organized records are helpful if we audit your income tax or GST/HST returns. If auditors cannot determine your income or taxable revenues because your records are incomplete, they will have to use other methods to establish your income and GST/HST net tax. This will cost you time. In addition, if your records do not support your claims, they could be disallowed.
  4. Your records will help keep you informed about the financial position of your business. You need good records to establish your profit or loss, as well as the value of your business. Information from good records can also tell you what is happening in your business and why. The successful use of records can show you trends in your business, let you compare performance in different years, and help you prepare budgets and forecasts.
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