Bookkeeping Basics for Sole Proprietors

Business tip

Bookkeeping basics: keep it simple, keep it current

A small habit each week beats a big cleanup every April.

Step one

Keep business money separate.

One account and one card for the business. Every transaction you can tag as business is one you don't have to untangle at tax time.

Step two

Record as you go.

Set a weekly 15-minute slot. Log income, expenses, and receipts while you still remember what each one was for.

Step three

Match your categories to the tax form.

Sole proprietors report business income and expenses on form T2125. Tracking expenses in categories that line up with that form saves you time at filing.

Records

Paper or digital, as long as it's readable.

CRA accepts electronic records, but you have to keep them in a readable format and be able to produce them. If you scan paper receipts and want to destroy the originals, CRA has imaging standards to follow.

Backups

Back it up somewhere else.

CRA encourages keeping backup copies of your business records away from your business location, in case of fire, flood, or theft.

Tools

Spreadsheet first, software when it gets busy.

A spreadsheet is fine when you have a few transactions a week. Accounting software starts to earn its keep once you have invoices, GST/HST, or lots of transactions. Make sure you can export your data.

Tickle & Compass

Reconcile monthly, keep records six years.

Compare your books to your bank statement every month, and keep records for six years after the tax year they relate to.

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General information, not tax, legal, or financial advice. Rules vary by province and change — confirm with an accountant.