YEAR-END FINANCIAL CHECKLIST: RECONCILING GST/QST ACCOUNTS

Year-end financial preparation is not complete without a full reconciliation of your GST and QST accounts. Even if you file monthly or quarterly, year-end reconciliation ensures that your sales tax reporting aligns with your financial statements, bookkeeping system, and bank activity. Many Quebec businesses discover significant discrepancies at year-end — missing invoices, unclaimed input tax credits, incorrect POS tax settings, or misclassified transactions. Left uncorrected, these discrepancies lead to filing errors, refund delays, audit exposure, and inaccurate financial reporting. This year-end GST/QST reconciliation checklist guides you through the essential steps to close your books cleanly and confidently.

A strong reconciliation process ensures your FPZ-500-V return, financial statements, and internal reports all tell the same story — and that your business is audit-ready.

LEGAL AND REGULATORY FRAMEWORK

The Excise Tax Act (GST) and the Quebec Taxation Act (QST) require businesses to maintain accurate records of:
• GST/QST collected
• GST/QST paid (input tax credits/refunds)
• taxable and exempt sales
• tax adjustments
• reconciliations and calculations

These amounts must match the totals reported in your GST/QST returns. Revenu Québec may request documentation at any time, particularly during year-end or refund reviews.

KEY COURT DECISIONS

Courts consistently confirm that taxpayers must reconcile their sales tax accounts and maintain clear documentation. Judges have upheld reassessments when:
• GST/QST collected did not match accounting system totals
• claimed input tax credits were unsupported
• deposits were misclassified as sales
• POS totals differed from reported revenue
• year-end adjustments corrected mistakes too late

Courts also recognize Revenu Québec’s authority to deny credits when records are incomplete or inconsistent.

WHY REVENU QUÉBEC TARGETS YEAR-END RECONCILIATION ISSUES

Year-end is when most discrepancies appear. Typical warning signs include:
• large differences between GST/QST returns and financial statements
• high outstanding balances in GST/QST control accounts
• unexplained adjustments
• unclaimed input tax credits
• mismatched bank deposits vs. sales
• incorrectly recorded capital purchases

These issues often indicate deeper weaknesses in a business’s accounting system and can lead to refund verifications or audits.

YEAR-END FINANCIAL CHECKLIST: RECONCILING GST/QST ACCOUNTS

Follow this detailed checklist before finalizing your financial statements.

1. Reconcile total annual sales
   Compare sales recorded in your bookkeeping system with:
   • POS reports
   • online platform sales summaries
   • bank deposits
   Separate taxable, zero-rated, and exempt sales for accuracy.

2. Reconcile GST/QST collected
   Match tax collected on invoices and POS transactions to the GST/QST collected accounts in your general ledger. Investigate discrepancies from:
   • manual overrides
   • incorrect tax codes
   • missing invoices
   • duplicated transactions

3. Reconcile input tax credits/input tax refunds
   Create a complete list of all GST/QST paid on expenses. Verify that each ITC/ITR is supported by a valid invoice showing:
   • supplier GST/QST numbers
   • clear descriptions
   • tax amounts
   Ensure no personal or non-eligible expenses are included.

4. Identify missing receipts or supplier invoices
   Request duplicates from suppliers immediately. Missing receipts lead to denied credits and year-end inaccuracies.

5. Review credit notes, refunds, and adjustments
   Ensure all adjustments affecting GST/QST — including bad debts, rebates, and returns — are properly reflected in your year-end totals.

6. Match deposits to revenue
   Reconcile all bank deposits and mark items that are not revenue (e.g., owner contributions, loans, transfers). Excluding these prevents overstated taxable sales.

7. Reconcile GST/QST control accounts
   Match the year-end balances in your GST collected, QST collected, and GST/QST paid accounts against reconciled totals. Year-end control account cleanup is essential for accurate reporting.

8. Verify capital purchases
   Capital assets such as machinery, equipment, computers, and vehicles often have large GST/QST amounts. Ensure asset invoices are:
   • recorded correctly
   • supported by tax-detailed receipts
   • included in ITC calculations

9. Review place-of-supply impacts
   Confirm that tax was charged or self-assessed correctly on interprovincial or international purchases.

10. Correct misclassifications
    Look for errors in tax coding, such as:
    • marking taxable items as exempt
    • forgetting to charge QST
    • incorrect HST rates for out-of-province clients

11. Prepare year-end adjusting entries
    Adjust for:
    • accrued expenses
    • prepaid expenses
    • deferred revenue
    • corrections identified during reconciliation

12. Prepare an audit-ready year-end GST/QST folder
    Include:
    • sales summaries
    • expense invoices
    • reconciliations
    • credit notes
    • control-account schedules
    • year-end trial balance
    • final FPZ-500-V return

13. Compare final totals to financial statements
    Your GST/QST reconciliation must support the numbers reported in your financial statements and income tax return. Differences require correction.

MACKISEN STRATEGY

Mackisen CPA helps businesses complete detailed year-end GST/QST reconciliations and prepare fully supported year-end financial statements. We identify errors, correct misclassifications, track missing invoices, rebuild ITC/ITR schedules, and prepare adjusting entries. Our team ensures your GST/QST filings and financial statements align perfectly.

For businesses experiencing recurring issues, Mackisen performs full cleanup and provides monthly or quarterly support to maintain long-term accuracy.

REAL CLIENT EXPERIENCE

A Quebec retail chain discovered a $15,000 discrepancy between GST/QST collected and their bookkeeping system. Mackisen reconciled accounts, identified POS coding issues, and corrected filings.

A consultant overlooked thousands in ITCs due to missing receipts. Mackisen reconstructed documentation and secured refunds.

A construction business failed to reconcile year-end GST/QST accounts, triggering a refund review. Mackisen rebuilt their reconciliation package and resolved the review quickly.

COMMON QUESTIONS

Do I need to reconcile GST/QST if I file monthly
Yes. Year-end reconciliation ensures annual financial accuracy and audit readiness.

What if I discover big mistakes
They can be corrected through adjustments or amended returns.

Can I claim old input tax credits
Yes, within statutory limits and with proper documentation.

Will reconciling reduce audit risk
Absolutely. Clean, consistent records significantly reduce triggers.

Do I need a CPA for year-end reconciliation
Businesses with high transaction volume or inconsistent systems benefit greatly from professional support.

WHY MACKISEN

With more than 35 years of combined CPA experience, Mackisen CPA Montreal ensures your year-end GST/QST reconciliations are accurate, complete, and audit ready. Our structured approach protects your business from reassessments and creates reliable financial statements.