Year-End Bookkeeping Checklist for Canadian Small Businesses

Year-end is the most important time in the bookkeeping calendar. For Canadian small business owners — whether you’re a sole proprietor, partnership, or corporation — closing your books correctly sets the stage for accurate tax filing, informed business decisions, and a smooth relationship with the CRA. This checklist covers every key step.

1. Confirm Your Fiscal Year-End Date

Before anything else, confirm your fiscal year-end. Corporations can choose any fiscal year-end when they incorporate; sole proprietors use December 31. Your year-end determines your filing deadlines:

• Corporations: T2 return due six months after fiscal year-end; taxes owing due two or three months after year-end
• Sole proprietors: T1 return due June 15; taxes owing due April 30
• Partnerships: T5013 due March 31

If you’re a corporation with a non-calendar year-end (e.g., March 31), your year-end checklist happens at a different time than your personal December 31 tasks — keep them separate.

2. Reconcile All Bank and Credit Card Accounts

Every bank account, credit card, and line of credit your business uses should be reconciled to your accounting records. This means:

• Comparing your bank statements to your accounting software
• Explaining every difference (outstanding cheques, timing differences, bank fees)
• Resolving any unexplained discrepancies

If you haven’t reconciled monthly throughout the year, this is the most time-consuming part of year-end. Monthly reconciliation is strongly recommended — it turns a week-long year-end task into a two-hour one.

3. Review Accounts Receivable

Pull an aged accounts receivable report. For each outstanding invoice, determine:

• Is the debt still collectible? If not, write it off as a bad debt (you can deduct bad debts on your tax return)
• Are you owed HST/GST on unpaid invoices? You may be able to claim a bad debt adjustment on your GST return
• Have you followed up on overdue amounts?

For Canadian income tax purposes, you generally recognize revenue when you invoice (accrual basis) — meaning you owe tax on money you haven’t yet received. Writing off genuine bad debts reduces that tax exposure.

4. Review Accounts Payable

Confirm all bills you owe are recorded in your books. Year-end is a common time for invoices to arrive for work done in November or December. Accruing those expenses ensures your income statement reflects the true cost of running your business during the year.

If you have vendor balances that seem incorrect, now is the time to reconcile them — before your accountant or bookkeeper starts preparing financial statements.

5. Reconcile HST/GST Collected and Paid

If you’re registered for GST, reconcile your GST return to your books:

• Confirm total GST collected matches your revenue × 5%
• Confirm total ITCs claimed match GST paid on expense receipts
• Ensure any GST remittances made during the year are recorded correctly

Discrepancies between your GST return and your financial statements are a CRA audit flag.

6. Process Payroll Year-End

If you have employees, payroll year-end requires:

• Finalizing payroll: Make sure all pay periods are processed before December 31
• Reconciling source deductions: Confirm that CPP, EI, and income tax deducted and remitted match your payroll records
• Preparing T4 slips: T4s must be issued to employees and filed with the CRA by the last day of February
• Preparing T4 summary: The T4 Summary form reconciles all T4s issued

If you have contractors rather than employees, prepare T4A slips for any contractor paid $500 or more during the year.

7. Take Inventory (If Applicable)

If your business holds physical inventory, you need an inventory count as of your fiscal year-end. The value of closing inventory affects your cost of goods sold (COGS) and, therefore, your net income and tax owing.

Use the lower of cost or net realizable value to value your inventory, and document your count methodology in case of a CRA review.

8. Review Capital Assets and Calculate CCA

The CRA requires you to use the Capital Cost Allowance (CCA) system rather than straight-line depreciation. At year-end:

• Add any new assets purchased during the year to the appropriate CCA class
• Apply the half-year rule (new assets in most classes can only claim 50% of the normal CCA in the year of acquisition)
• Calculate CCA for each class and record it in your books

Common CCA classes for Vancouver small businesses include:

• Class 10 (30%): Most vehicles
• Class 10.1 (30%): Passenger vehicles costing more than $37,000
• Class 12 (100%): Computer software and small tools under $500
• Class 50 (55%): Computers and data processing equipment

9. Reconcile Shareholder Loans

If your business is a corporation, the shareholder loan account tracks money you’ve lent to the company or borrowed from it. At year-end:

• Confirm the balance of the shareholder loan matches your records
• If you owe money to the corporation (debit balance), the CRA requires it to be repaid within one year of the corporation’s fiscal year-end, or it will be included in your personal income

Shareholder loan issues are one of the most common reasons Canadian small business owners face unexpected personal tax bills.

10. Gather and Organize All Receipts

For every expense in your books, you need a receipt. CRA requires you to keep supporting documents for six years from the end of the tax year they relate to. At year-end:

• Scan and organize physical receipts
• Download electronic receipts from email and vendor portals
• Ensure every expense over $30 has documentation
• Confirm all mileage logs are complete if you’re claiming vehicle expenses

Cloud storage (Google Drive, Dropbox, or built-in features of QuickBooks Online or Xero) is the easiest way to maintain a digital archive.

11. Review Home Office Expenses (If Applicable)

If you work from home, you may be able to deduct a portion of your home expenses as business expenses:

• Sole proprietors: Can deduct the business-use portion of rent/mortgage interest, utilities, property tax, and maintenance
• Employees (T2200): Can deduct home office expenses if required by your employer and working from home more than 50% of the time

Calculate your workspace as a percentage of total home square footage, and apply that percentage to eligible home expenses.

12. Back Up Your Accounting Data

Before closing the year, back up your accounting software data. If you use cloud-based software like QuickBooks Online or Xero, your data is backed up automatically — but it’s worth exporting financial reports (income statement, balance sheet, general ledger) as PDFs for your records.

13. Prepare Year-End Financial Statements

Your accountant or bookkeeper should prepare:

• Income statement (Profit & Loss): Revenue minus expenses = net income
• Balance sheet: Assets, liabilities, and equity as of your year-end date
• General ledger: Full transaction detail for the year

These statements form the basis of your tax return and are the primary documents a CRA auditor would review.

Filing Deadlines to Remember

Getting Help With Year-End

If year-end feels overwhelming, you’re not alone. Many Vancouver small business owners hand off year-end tasks to a professional bookkeeper or accountant. At Hailstone Technologies, we prepare year-end working papers, reconcile your accounts, and hand your files off to your tax accountant in a clean, audit-ready state. Get in touch to learn more.