Why is it important to keep supporting documents for your business operations?

As a business owner, it is important to keep thorough and organized documentation supporting all business transactions to comply with Canada Revenue Agency (CRA) requirements. In case of audit, having credit card statements showing business expenditures is not sufficient for the CRA.

 It is important to keep track of gross income from your business, including sales invoices, cash register tapes, receipts, bank deposit slips, fee statements, and contracts. The details of business expenses should also be recorded, including the date of purchase, the name and address of the seller or supplier, the name and address of the buyer, a full description of the goods or services, and the vendor's business number and GST/HST registration number. If a document with all this information is not available, it is important to at least record the name and address of the seller, the amount paid for the services, the date, and the details of the transaction in an expense journal. Without proper documentation, it can be difficult to accurately recall all these details at year-end.

 It is also important to keep records of assets purchased and sold, including the name of the seller, the cost of purchase, the date of purchase, the date of disposition or trade-in, and the selling price of the asset. This information will be necessary for calculating your capital cost allowance (CCA) for the year.

 Keeping backup and documents related to business operations is crucial for compliance, accuracy, and the efficient running of your business. Taking the time to properly record and organize these documents will save time and hassle in the long run.