Year-End Bookkeeping Checklist

Introduction
A complete year-end bookkeeping checklist is essential for every Canadian business — sole proprietors, corporations, partnerships, freelancers, e-commerce stores, and real estate investors. Proper year-end bookkeeping ensures accurate financial statements, smooth tax filings, audit-proof records, and clear insight into business performance. CRA and Revenu Québec depend heavily on year-end accuracy to assess taxable income, GST/QST compliance, payroll remittances, and corporate filings. Errors at year-end can trigger reassessments, penalties, and cash flow problems. This guide provides a full year-end bookkeeping checklist for Canadian businesses to ensure nothing is missed.

Legal and Regulatory Framework
Year-end bookkeeping requirements are governed by the Income Tax Act, CRA books-and-records rules, GST/HST and QST legislation, payroll compliance (CPP, EI, QPP, QPIP), T2 corporate filing standards under ASPE or IFRS, T2125 filing for sole proprietors, Québec’s Taxation Act, TP-80 rules for business income, and T4/RL-1 year-end slips. CRA requires all businesses to maintain accurate year-end records for at least six years.

Step 1: Reconcile All Bank Accounts and Credit Cards
Every bank account, credit card, PayPal, Stripe, Square, Shopify Payments, and Amazon Pay account must be reconciled to financial statements. Reconciliation ensures:
all transactions are recorded
no duplicates exist
balances match financial statements
CRA often requests bank reconciliations during audits.

Step 2: Reconcile Accounts Receivable
Review all unpaid invoices. Year-end tasks include:
recording late payments
adjusting doubtful accounts
writing off uncollectible amounts
accurate receivable balances ensure correct taxable income.

Step 3: Reconcile Accounts Payable
Review all outstanding supplier bills. Ensure:
expenses are recorded in the correct year
missing bills are entered
all recurring expenses are captured
payable reconciliations prevent understated liabilities.

Step 4: Complete a Full Inventory Count
For businesses with inventory, CRA requires accurate year-end counts. Tasks include:
counting inventory physically
adjusting COGS
recording damaged or expired stock
recalculating landed costs (shipping, duties)
E-commerce and retail businesses often face CRA audits due to incorrect inventory valuation.

Step 5: Review Fixed Assets and Depreciation (CCA)
Update:
new equipment purchases
vehicle additions
leasehold improvements
depreciation (CCA) schedules
review disposals or sales
Missing CCA entries lead to overstated profit and unnecessary tax.

Step 6: Update Loan Balances and Interest
Year-end must reflect:
loan principal
interest paid
new loans
loan amortization schedules
Interest is deductible only when recorded properly.

Step 7: Review Payroll and Source Deductions
Ensure payroll accounts match T4/RL-1 slips. Year-end payroll responsibilities include:
CPP/QPP reconciliation
EI/QPIP reconciliation
remitting any outstanding payroll deductions
issuing T4 and RL-1 slips
Payroll errors often lead to CRA and Revenu Québec penalties.

Step 8: Capture All Year-End Adjustments
Year-end adjustments include:
accrued expenses
prepaid expenses
deferred revenue
capital purchases
asset write-downs
Adjustments ensure accurate accrual accounting as required by CRA for most businesses.

Step 9: Reconcile GST/HST and QST Accounts
Review:
GST/HST collected
GST/HST paid (ITCs)
QST collected
QST paid (ITRs)
closing balances
Ensure all filings are up to date. Incorrect GST/QST reconciliation is the number one trigger for audit.

Step 10: Verify Shareholder Loan Balances
Corporations must confirm shareholder loan balances to avoid taxable benefits. Review:
shareholder withdrawals
personal expenses paid by the corporation
loan repayments
CRA may tax shareholder loans taken for more than one fiscal year.

Step 11: Review Income and Expense Categories
Ensure expenses are properly categorized:
advertising
office supplies
software
meals
vehicle expenses
rent
utilities
Capital vs current expenses must be separated accurately.

Step 12: Prepare Year-End Financial Statements
Prepare or finalize:
income statement
balance sheet
cash flow statement
These statements form the basis of corporate tax filings and lender evaluations.

Step 13: Collect All Year-End Documents
Gather documents including:
bank statements
credit card statements
loan agreements
asset purchase invoices
rental agreements
insurance documents
merchant fee reports
Shopify/Amazon statements
CRA requests supporting documentation during audits.

Step 14: Confirm T-Slip Requirements
Depending on business structure, you may need to file:
T4 and RL-1 for employees
T5 for interest or dividends
T5018 for construction subcontractors
T4A for contractor payments
Failure to file slips on time results in penalties.

Step 15: Review Tax Instalments
Corporations and high-income self-employed individuals must pay tax instalments. Reconcile all instalments to avoid double-payment or underpayment penalties.

Step 16: Review Cash Flow Before Year-End
Plan cash flow for upcoming remittances:
GST/HST
QST
payroll deductions
corporate income tax
Many businesses face January and February cash crunches without planning.

Step 17: Correct Prior-Year Errors
Identify errors that may affect year-end accuracy:
duplicate transactions
incorrect GST/QST codes
missing bills
prior-year reconciliation issues
fixing errors early prevents CRA reassessments later.

Step 18: Prepare for Tax Filing (T2 or T2125)
Corporations must prepare T2 returns shortly after year-end.
Sole proprietors must prepare T2125.
Both require accurate bookkeeping and supporting financial statements.

Step 19: Archive Records as Required by CRA
CRA requires businesses to keep records for at least six years. Ensure secure digital backups of:
invoices
receipts
contracts
financial statements
tax filings
bank reconciliations
Good record-keeping supports audit defense.

Common Year-End Bookkeeping Mistakes
not reconciling accounts
missing inventory counts
incorrect GST/QST filings
ignoring shareholder loans
not categorizing expenses correctly
forgetting year-end adjustments
CRA and ARQ penalize businesses with poor year-end bookkeeping systems.

Key Court and CRA Positions
Courts consistently uphold CRA reassessments when businesses maintain incomplete or inaccurate records. CRA uses year-end financial statements to verify gross margin, income accuracy, GST/QST compliance, and payroll correctness.

Why CRA and Revenu Québec Audit Year-End Records
They examine:
underreported income
inflated expenses
GST/QST inconsistencies
incorrect payroll filings
missing documentation
unbalanced shareholder loans
Year-end accuracy is a major audit focus.

Mackisen Strategy
Mackisen CPA provides complete year-end bookkeeping support. We clean and reconcile books, prepare financial statements, correct GST/QST accounts, review payroll, update CCA schedules, prepare T4/T5/T5018 slips, fix prior-year errors, and ensure your business is 100 percent audit-proof. Our year-end process prepares you fully for T2 or T2125 filing.

Real Client Experience
A Montréal retailer failed to reconcile bank accounts for two years; Mackisen corrected the books and prevented CRA reassessment. A construction company had inaccurate payroll; we corrected remittances and avoided penalties. A Shopify seller underreported sales due to platform sync errors; we rebuilt revenue statements. A consultant had messy bookkeeping with missing invoices; Mackisen reorganized all financials and filed accurate returns.

Common Questions
When should year-end bookkeeping begin? At least 30–60 days before year-end.
Do I need a CPA for year-end? Yes for corporations and recommended for all businesses.
What is the biggest year-end mistake? Not reconciling GST/QST and bank accounts.
Can poor year-end books trigger audits? Yes — a major CRA red flag.
Do I need inventory counts? Yes if you sell products.

Why Mackisen
With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps businesses complete their year-end bookkeeping checklist with accuracy, efficiency, and full CRA/ARQ compliance. Whether preparing T2 filings, improving systems, or conducting a full year-end cleanup, our expert team ensures your business remains audit-proof and financially strong.