Good bookkeeping for a Canadian trade comes down to three habits: record every dollar in and out as it happens, keep the receipt that backs each one, and reconcile against your bank account regularly. Do that and your GST/HST return, your income tax, and any CRA review all become routine instead of a panic. You do not need an accounting degree. You need a system you actually use, a clear split between business and personal money, and the discipline to keep your records for the six years the Canada Revenue Agency (CRA) requires.
What you actually need to track
Bookkeeping is just a complete, dated record of your money. For a trade business, track:
- Income: every invoice you issue and every payment you receive, with the date, the client, the amount, and the GST/HST charged shown separately.
- Expenses: every business purchase, with the date, the supplier, the amount, what it was for, and the GST/HST you paid (your input tax credits).
- Assets: larger purchases such as a truck, a trailer, or major tools, recorded separately because they are written down over time through capital cost allowance, not expensed all at once.
- Mileage: a logbook if you claim vehicle costs (see Record-Keeping for the CRA).
If you are registered for GST/HST, keeping the tax separate on both sides is what lets you remit what you collected, net of what you paid. See Bookkeeping and Accounting Software for tools that do this automatically.
Cash basis versus accrual basis
There are two ways to record when income and expenses count.
- Cash basis records income when the cash actually lands and an expense when you actually pay it. It is simpler and matches your bank balance.
- Accrual basis records income when you invoice it and an expense when you incur it, regardless of when money moves. It gives a truer picture of a job's profit but takes more work.
Here is the rule that catches trades out: for income tax, self-employed businesses must generally use the accrual method, not cash. The CRA expects you to report income in the year you earned it, even if the client pays in January. GST/HST also generally runs on an invoice (accrual) basis once you are registered. Talk to your accountant about how this applies to you (see Self-Employed Tax: The Complete Guide), and do not assume the cash in your account at year-end is your taxable income.
Keep the receipt for every claim
A number on your return without a document behind it is a number the CRA can disallow. Keep the supporting paper or digital file for:
- Every sales invoice you issue.
- Every purchase receipt and supplier invoice behind an expense.
- Bank and credit-card statements.
- Your filed GST/HST returns and confirmation numbers.
The CRA accepts digital records in full, so a clear photo or PDF is fine and you can recycle the paper, as long as the copy is legible, complete, and reliably backed up. A blurry or cut-off scan does not count.
The 6-year rule
You must keep your records and supporting documents for at least six years from the end of the last tax year they relate to. Records for the 2024 tax year, for example, are kept until at least the end of 2030. Some situations run longer: filing late starts the six years from the filing date, an objection or appeal extends it, and capital property records are kept until six years after you dispose of the asset. The full detail and the digital-record rules are in Record-Keeping for the CRA.
Reconcile, do not just record
Recording is half the job. Once a month, match your books against your bank and card statements line by line. Reconciling catches a missed invoice, a double entry, or a payment that never arrived, while you can still do something about it. A business that reconciles monthly walks into year-end with clean numbers; one that does not spends the spring rebuilding a year from a shoebox.
Common mistakes
- Letting receipts pile up. Capture each one the day you get it, before thermal ink fades and memory blurs. A weekly catch-up beats an annual archaeology dig.
- Assuming cash in the bank equals profit. Income tax generally runs on accrual, so work you invoiced but have not been paid for still counts as this year's income.
- Mixing business and personal spending. It makes every claim arguable. Keep them apart (see Separating Business and Personal Finances).
- No backup. One copy on one phone is one dropped phone away from losing a year of records. Use cloud storage with redundancy.
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