Record Keeping - Why it is important

Why keep records :

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

1.    Complete and organized records help:

A.   Identify the sources of your income

B.   Help you decide if you should charge GST/HST.

C.   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.

D.  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:

A.   Tax savings. Good records serve as:

B.   A reminder of the expenses you can deduct, and

C.   The input tax credits (ITCs) you may be eligible to claim.

D.  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:

A.   If the Canada Revenue Agency audits your income tax or GST/HST returns.

B.   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:

A.   Informed about the financial position of your business.

B.   To establish your profit or loss,

C.   The value of your business.

D.  Tell you what is happening in your business and why.

E.    Show you trends in your business,

F.    Let you compare performance in different years, and

G.   help you prepare budgets and forecasts.