How to Prepare Your Books for Corporate Year End

Who this applies to

Small, owner-managed corporations in Canada. A corporation's tax year is its fiscal period, and the CRA requires the corporation income tax return (T2) to be filed within six months of the end of each tax year. Payment of any balance owing is generally due earlier than the filing deadline, so confirm your dates on the CRA's filing page.

The year-end checklist

1. Reconcile bank and credit card accountsEvery account should match its statement to the last day of the fiscal year, with no unexplained items.
2. Review accounts receivableConfirm which invoices are still owed to you, and identify any that will not be collected.
3. Review accounts payableList bills that relate to this year but were not yet paid at year end.
4. Reconcile loans and financingMatch loan balances to lender statements and separate interest from principal.
5. Reconcile payrollMake sure payroll in the books agrees with payroll records and remittances for the year.
6. Reconcile GST/HSTIf registered, confirm that amounts collected and paid in the books agree with what was filed.
7. Document large purchasesEquipment, vehicles, computers and renovations are usually treated differently from everyday expenses. Keep the invoices.
8. Count inventoryIf you hold inventory, count it as close to year end as possible.
9. Record owner transactionsMoney the owner put in or took out, and expenses paid personally for the business, all need to be recorded and explained.
10. Gather it in one placeStatements, the notes above, and last year's financial statements and return.

Common problems we see

• Personal and business spending mixed on the same card
• Deposits recorded as sales when they were loans, transfers or owner money
• Missing statements for an account that was opened or closed during the year
• Receipts for large purchases that cannot be found

All of these are much easier to fix monthly than at year end. That is why corporate tax preparation and monthly bookkeeping work best together.

Official sources

• Corporation income tax return (Canada Revenue Agency)
• When to file your corporation income tax return (Canada Revenue Agency)
• Keeping records (Canada Revenue Agency)

This guide is general information for Canadian taxpayers and small businesses. It is not tax, legal or financial advice for your situation, and rules change. Check the official sources linked above or book a consultation before acting on it. See the full disclaimer.