Shoe Store Bookkeeping Guide: How to Track Inventory, Sales, COGS, Returns, and Retail Expenses
Shoe Store Bookkeeping Canada: Expert Shoe Store Accounting and Footwear Retail Bookkeeping Services by Gondaliya CPA
Shoe store bookkeeping Canada is handled with precision by Gondaliya CPA, offering expert shoe store accounting and footwear retail bookkeeping services tailored to the unique needs of Canadian retailers. Their detailed approach ensures accurate financial tracking and compliance for shoe stores across the country.
A shoe store carries one style in eight sizes and two widths, which means sixteen units of something that might sell as four. Depth like that makes inventory the entire problem, and it is why retail bookkeeping for consumer goods businesses lives or dies on how the stock is counted and costed.
Quick Summary
Shoe stores hold deep inventory in a size and width matrix, import much of it under high duty rates, and take returns on a scale most retail does not. Landed cost, inventory valuation, return handling and markdown timing decide the margin, and all four are commonly got wrong.
Reading time: 50 minutes.
Table of Contents
- Setting the Books Up for Footwear
- Landed Cost and Inventory Valuation
- Counts, Shrinkage and Write-Downs
- Sales, Returns and Gift Cards
- COGS, Margin and the Reports That Matter
- Expenses, Compliance and Working With Us
- Frequently Asked Questions
- The Bookkeeping Checklist
- Footwear Retailers We Serve
- Professional Guidance and Quick Reference
The Numbers That Matter
This article covers Canada, with Ontario and Toronto context, and reflects rules current to 2026. It applies to incorporated shoe stores, independent footwear retailers, multi-location chains and retailers selling both in store and online. Figures marked illustrative are examples, not quotes, and any masked engagement notes end with “Figures changed for privacy.” This is educational information only and not tax or legal advice. Tariff classification and customs valuation are matters for the Canada Border Services Agency and a licensed customs broker, and sit outside accounting scope.
Setting the Books Up for Footwear
Setting the Books Up for Footwear
The Foundation
Footwear is not general retail. Three features change how the books have to work.
What Makes It Different
- Depth of inventory: One style in a full size and width run is a dozen or more units of what is commercially a single decision. Stock value is high relative to the number of products you actually chose to carry
- Import duty: Footwear attracts some of the highest tariff rates in the Canadian schedule. Duty is a real cost that belongs in inventory, not an afterthought
- Return volume: Fit-driven returns run far higher than most retail, so returns and exchanges have to be a designed process rather than an exception
A chart of accounts built for general retail misses all three, which is why margin reports from a generic setup rarely mean anything in a shoe store.
A Chart of Accounts That Works
| Account Group | What Sits In It |
|---|---|
| Sales by category | Athletic, dress, casual, work and safety, children’s, accessories |
| Returns and allowances | Contra revenue, kept visible rather than netted into sales |
| Discounts and markdowns | Separated from returns so each can be measured |
| Inventory | Stock at landed cost, by location where you have several |
| Cost of goods sold | Landed cost released when the item sells |
| Freight and duty in | Capitalised into inventory, not expensed on arrival |
| Shrinkage and write-downs | Tracked separately so the cause is visible |
| Deferred revenue | Gift cards, store credit and layaway deposits |
| Merchant fees | Processing costs as an expense, never netted off sales |
| Occupancy by location | Rent, common area charges, utilities, coded by store |
Splitting returns from markdowns matters more than it sounds. A high return rate is a fit or sizing problem; a high markdown rate is a buying problem. Pooled into one number, neither is visible.
Systems
Point-of-sale and inventory systems built for footwear handle the size and width matrix natively and carry cost at the SKU level. Where the system talks to your accounting file, each sale releases the right cost automatically.
What technology does not do is decide the landed cost or the write-down policy. Those are judgements that have to be set up correctly and then applied consistently.
Returns netted straight into sales is the setup that hides the most. A store running a high return rate on one brand cannot see it, and keeps reordering. Figures changed for privacy.
Risk Warning: Duty and freight belong in inventory cost, not in expenses on arrival. Please build landed cost before the stock hits the floor.
Landed Cost and Inventory Valuation
Landed Cost and Inventory Valuation
The Cost
What Goes Into Landed Cost
The cost of a pair of shoes is everything spent to get it onto your floor ready to sell.
| Cost | In Inventory? | Why |
|---|---|---|
| Supplier invoice price | Yes | The base purchase cost |
| Customs duty | Yes | A non-recoverable cost of acquiring the goods |
| Inbound freight and shipping | Yes | Cost of bringing stock to its location |
| Customs brokerage fees | Yes | Directly attributable to the import |
| Currency differences on payment | Depends | Treatment varies, so please have it reviewed |
| GST paid at the border | No | Recoverable as an input tax credit, so not a cost |
| Store rent, wages, utilities | No | Period costs, not attributable to a unit |
| Outbound shipping to customers | No | A selling cost, not a cost of the goods |
The GST line is the one that catches people. Tax paid at the border is recoverable through an input tax credit where you are registered, so it should not sit in inventory cost. Duty is different: it is not recoverable and it belongs in the cost.
A store imports 200 pairs at a supplier price of $9,000. Duty and inbound freight add $2,400, and brokerage adds $180. The landed cost is $11,580, or roughly $58 a pair rather than the $45 the invoice suggests. GST paid at the border is recovered separately and stays out of the cost. Pricing from the invoice figure understates cost by nearly a third. Figures changed for privacy.
That gap is why footwear margin reports from invoice-cost books are unreliable. Duty rates on footwear are among the highest in the Canadian tariff, so the effect is larger here than in most retail categories.
Allocating Landed Cost Across a Shipment
A single shipment usually contains several styles at different prices. Freight, duty and brokerage have to be spread across them.
- Allocate duty by the actual rate applying to each line, since rates differ by construction and material
- Allocate freight on a consistent basis, typically value or units, and use the same basis each time
- Keep the commercial invoice, the customs accounting document and the broker invoice together
- Post the allocation to inventory when the shipment is received, not when the broker bills you
Tariff classification is a customs matter for your broker. What accounting needs is the resulting duty figure attached to the right goods.
Valuation Method
Inventory must be valued on a consistent, recognised basis. First in, first out and weighted average cost are both acceptable, and the method should not change from year to year without good reason.
Weighted average tends to suit footwear because the same SKU arrives across multiple shipments at different landed costs, and averaging avoids tracking which physical pair came from which container.
Whichever you use, apply it consistently and be able to explain it. A store that values stock differently in a year when margins were poor is inviting the obvious question.
Lower of Cost and Net Realisable Value
Inventory is carried at the lower of cost and what you can realistically sell it for. In footwear that bites regularly, because last season’s stock in broken size runs does not sell at full price.
Where the realistic selling price net of selling costs is below landed cost, the difference is a write-down. It is a legitimate deduction supported by evidence: the eventual markdown price, comparable clearance results, or the fact that a size run is broken.
What it cannot be is a year-end adjustment chosen to produce a number.
Duty left out of landed cost is the most common footwear error we correct. On a high-duty category it moves the reported margin by several points across the whole file. Figures changed for privacy.
Key Stat: Duty belongs in inventory cost; GST paid at the border does not, because it is recoverable. Please check which side of that line each import charge sits on.
Counts, Shrinkage and Write-Downs
Counts, Shrinkage and Write-Downs
The Stock
Counting a Size Matrix
Counting shoes is harder than counting most retail because the unit is a size and width within a style, and the stock room holds boxes that all look alike.
A full count at year end is the minimum. Cycle counting through the year is better, because it finds problems while they are still explainable.
- Count by SKU including size and width, not by style
- Use count sheets generated from the system rather than counting into a blank list
- Count the display floor and the stock room separately, then combine
- Include stock out on hold, in transit between locations and awaiting return to supplier
- Have a second person verify high-value lines
- Investigate variances before adjusting rather than posting the difference
Cycle counting works well here. Counting one brand or one wall a week means the whole store gets covered without ever closing, and a discrepancy is traced to a fortnight rather than a year.
Shrinkage
Shrinkage in footwear comes from theft, mismatched pairs, damage, and receiving errors where the box does not contain what the label says.
The adjustment is a legitimate expense where it reflects genuine loss, supported by the count records showing what was expected and what was found.
A store expects 1,840 pairs from its system and counts 1,806. The 34-pair variance is investigated: nine are traced to a receiving error, six to damaged stock never written off, and the remainder is unexplained loss. Recording the whole variance as shrinkage without that breakdown hides two fixable process problems. Figures changed for privacy.
The value of investigating is operational rather than tax. The deduction is the same either way; what changes is whether you fix the receiving process.
Aged Stock and Markdowns
Footwear ages badly. A style two seasons old in three remaining sizes is worth what somebody will pay for it, not what you paid.
Run an aged inventory report regularly showing stock by age band. Anything past a year deserves a decision: mark it down, transfer it to a location where it moves, or write it down.
Timing matters at year end. A markdown taken before your year end reduces that year’s inventory value and margin; taken after, it falls in the following year. That is a legitimate timing decision provided the markdown is real.
Damaged and Mismatched Stock
Single shoes, display samples that have faded, and returns that cannot be resold need writing off rather than sitting in inventory at full cost.
Keep a log with the SKU, the reason and the date. A write-off with nothing behind it is a deduction with no support, and in a business holding thousands of units it is exactly the kind of adjustment that gets questioned.
The variance breakdown matters more than the variance. Stores that only record a shrinkage number keep making the same receiving error every season. Figures changed for privacy.
Risk Warning: A write-down needs evidence of what the stock is actually worth. Please support it with markdown or clearance results rather than a judgement at year end.
Sales, Returns and Gift Cards
Sales, Returns and Gift Cards
The Revenue
Recording Sales
Record gross sales before discounts, with discounts shown separately. Netting them hides your real pricing and makes any margin comparison meaningless.
Split takings by payment method and reconcile each:
| Method | What to Match | Common Failure |
|---|---|---|
| Card | Gross sales to processor statement, fee to expense | Net deposit recorded as revenue |
| Cash | Till count to the deposit | No daily count, so shortages are invisible |
| E-transfer | Deposit to the transaction | Deposits with no matching sale |
| Online orders | Platform payout to gross sales less fees | Payout treated as revenue |
| Gift card redemption | Release from liability, not new revenue | Counted twice, on sale and on use |
Processing fees are an expense, never a reduction of sales. Recording the net deposit understates revenue and loses the fee as a deduction, and the processor reports the gross figure independently.
Chargebacks need reversing against the original sale. In a store selling online as well, they arrive weeks later and are easy to miss.
Returns and Exchanges
Footwear return rates are high, and the accounting has to reflect what actually happened rather than being netted away.
A return reverses the sale, reverses the cost of goods sold, and puts the stock back into inventory if it is resaleable. Where it is not resaleable, it goes to the write-off log instead.
An exchange is two transactions: the original sale reversed and a new sale recorded. Treating it as a single adjustment loses both the return data and the new sale.
The GST/HST side follows. Where you refund a customer, the tax charged on the original sale is adjusted, and that adjustment flows into your return for the period.
- Record returns as contra revenue, visible rather than netted into sales
- Reverse the cost and restore the inventory unit where the item is resaleable
- Send non-resaleable returns to write-off with a reason logged
- Handle exchanges as a reversal plus a new sale
- Adjust the tax charged when a refund is given
- Keep the original receipt reference on every return
Return data is worth having for its own sake. A brand or a style running a return rate well above the store average is telling you something about sizing that no other report will.
Gift Cards and Store Credit
A gift card sale is not revenue. It is a liability until the card is redeemed, at which point the redemption becomes a sale with the corresponding cost released.
Store credit issued on a return works the same way: a liability replacing the refund, cleared when the customer spends it.
Track the outstanding balance so it can be broken down. Note that provincial consumer protection legislation restricts expiry on many gift cards, so the liability can persist for years. That is a legal question rather than an accounting one, and it affects how long the balance stays on your books.
Layaway and Special Orders
Deposits taken on a layaway or a special order are a liability until the customer takes the goods. The sale is recorded on completion, not on the deposit.
Special orders raise a further question about who owns the stock while it is on order. Where the customer has committed and paid, and you are ordering specifically for them, the arrangement may look more like an agency than a purchase for stock. Please have those reviewed rather than defaulting.
Exchanges recorded as a single net adjustment lose the return data entirely. A store cannot then see that one brand’s sizing is driving a quarter of its returns. Figures changed for privacy.
Key Stat: An exchange is a reversal plus a new sale, not one adjustment. Please record both legs so the return data survives.
COGS, Margin and the Reports That Matter
COGS, Margin and the Reports That Matter
The Analysis
Calculating Cost of Goods Sold
Cost of goods sold is opening inventory plus purchases at landed cost, less closing inventory, adjusted for returns to suppliers and write-offs.
| Component | Effect on COGS |
|---|---|
| Opening inventory at landed cost | Adds |
| Purchases including duty, freight and brokerage | Adds |
| Returns to suppliers and credits received | Reduces |
| Closing inventory at the lower of cost and net realisable value | Reduces |
| Shrinkage and write-offs | Adds, though shown separately is more useful |
| Customer returns of resaleable stock | Reduces, as the cost goes back to inventory |
Shrinkage and write-downs are technically part of the cost of what you sold, but showing them as separate lines rather than burying them in COGS is far more useful. A margin that looks thin because of theft is a different problem from one that looks thin because you bought badly.
The Reports Worth Producing
| Report | What It Tells You |
|---|---|
| Gross margin by category | Which product lines actually earn |
| Sell-through rate | What proportion of a buy has sold, by style or season |
| Inventory turns | How many times stock cycles in a year |
| Aged inventory | What is sitting and needs a decision |
| Return rate by brand | Sizing and fit problems in the range |
| Markdown rate | How much margin is being given away and where |
| Sales per square foot | Whether the space is earning its rent |
Gross margin by category and sell-through are the two that change buying decisions. A category with a good headline margin but a poor sell-through rate is not earning; it is just not marked down yet.
Multi-Location Reporting
Where you run several stores, code revenue, cost and occupancy by location so each has its own margin. Inter-store transfers move inventory at cost, not at retail, and need recording on both sides.
A consolidated view is what the corporate return needs, but the per-store view is what tells you whether a lease is worth renewing.
What the Numbers Feed
The trial balance maps to GIFI codes for the corporate return, producing the balance sheet and income statement schedules the CRA expects. Inventory is a balance sheet figure the return depends on, which is why the count matters beyond internal reporting.
Many retailers also need statements prepared to a recognised standard for a landlord or a lender, typically a compilation engagement under CSRS 4200. Those rest on the same numbers.
Sell-through against margin is the report that changes buying. Plenty of stores discover their best-margin category is the one they cannot sell without discounting it. Figures changed for privacy.
Pro Tip: Please show shrinkage and markdowns as separate lines rather than inside cost of goods sold. A thin margin has several possible causes and you need to know which.
Expenses, Compliance and Working With Gondaliya CPA
Expenses, Compliance and Working With Us
The Compliance
Store Expenses and Assets
| Item | Treatment |
|---|---|
| Rent, common area charges, utilities | Current expense, coded by location |
| Shelving, seating, display units, till counters | Class 8 at 20% |
| Computers and point-of-sale terminals | Class 50 at 55% |
| Fitted shelving, flooring, lighting, signage fixed to the premises | Class 13 over the lease term |
| Store software | Class 12 |
| Shopping bags, tissue, boxes | Current expense as consumed |
| Advertising and marketing | Current expense |
The recurring error is treating the whole fit-out as one number. Free-standing shelving you could move to another store is equipment; shelving built into the wall is a leasehold improvement written off over the lease term.
Bill C-15 received Royal Assent on 26 March 2026, reinstating the accelerated investment incentive for most depreciable property acquired after 2024 and available for use before 2030. Leasehold improvements are among the excluded classes, so a fit-out and a set of display units may be treated differently. Recent purchases are worth reviewing.
Payroll and Staff Discounts
Retail payroll brings part-time staff, variable hours and commission. Everyone working your hours on your floor is an employee, with income tax, CPP and EI withheld and remitted on the schedule set by your remitter type. Our retail store payroll services cover the mechanics.
Staff discounts can create a taxable benefit where the discount is not available to the general public and the price falls below your cost. Shoe stores often give generous staff pricing, and the reporting obligation does not depend on the amount being small.
T4 and T4A slips are due by the last day of February. With a large part-time team the per-slip penalty scales, so a late filing costs more here than in a small office.
GST/HST
Footwear sales are taxable supplies. You must register for GST/HST once taxable revenue exceeds $30,000 across four consecutive calendar quarters, which any store passes immediately.
The CRA assigns your reporting period based on taxable supplies. Annual filing applies below $1.5 million, quarterly between $1.5 million and $6 million, and monthly above that. Returns are due one month after the period end for monthly and quarterly filers, with a different rule for annual filers.
Input tax credits recover the tax you pay on stock, rent, fixtures and services, including GST paid at the border on imports. Each needs documentation showing the supplier’s registration number, or the customs accounting document for imports.
Credits generally have to be claimed within four years, and the entitlement is lost after that. A store that has been sitting on unclaimed import tax should check how far back it can still go.
Deadlines
| Obligation | Deadline | If Missed |
|---|---|---|
| T2 corporate return | Six months after fiscal year-end | 5% plus 1% per complete month, to twelve |
| Balance owing | Three months for eligible CCPCs, otherwise two | Interest from the due date |
| GST/HST return | Per your assigned reporting period | Penalty plus interest |
| Payroll remittances | Per your remitter type | Penalty and director liability |
| T4 and T4A slips | Last day of February | Penalty by slip count |
What Draws a Review
- Inventory that never reconciles to a physical count
- Margin materially out of line with the sector without explanation
- Write-downs with no supporting evidence of value
- Deposits exceeding reported sales, or an unusually low cash percentage
- Input tax credits claimed without customs or supplier documentation
- Gift card sales taken into revenue with no liability balance
Our CRA audit guide sets out what a review involves. A store with count sheets, landed cost workings and a reconciled processor statement has already answered most of it.
How We Work With Footwear Retailers
We support incorporated shoe stores on a flat annual fee covering bookkeeping with landed cost build-up, inventory valuation and write-down support, count and shrinkage review, returns and gift card liability tracking, processor reconciliation with fees expensed, margin and sell-through reporting by category, payroll and slips, staff discount benefit review, the asset register with the Class 8 and Class 13 split, GST/HST filing, financial statements and the corporate return.
Pricing is quoted before any work begins, including HST, with a one-business-day response.
Getting Started
Bring three things: a recent import shipment file with the broker invoice, an inventory valuation report, and your last filed corporate return. Those show us whether landed cost is built properly, whether stock is valued correctly, and what needs fixing.
Contact Gondaliya CPA at info@gondaliyacpa.ca, call 647-212-9559, or send us a message.
The broker invoice is the document that settles a footwear file. It shows the duty, the brokerage and the GST, and whether all three went to the right place. Figures changed for privacy.
Pro Tip: Please check how far back your unclaimed import tax credits go. The entitlement generally expires after four years.
FAQs on Shoe Store Bookkeeping Canada
Frequently Asked Questions
FAQ
What goes into the landed cost of imported footwear?+
The supplier invoice price plus customs duty, inbound freight and brokerage fees. GST paid at the border stays out, because it is recoverable as an input tax credit.
Why does duty matter so much for shoe stores?+
Footwear attracts some of the highest tariff rates in the Canadian schedule, so leaving duty out of cost understates the true cost of every imported pair and overstates margin.
Which inventory valuation method should I use?+
First in, first out or weighted average cost are both acceptable. Weighted average often suits footwear because the same SKU arrives at different landed costs across shipments.
How often should I count inventory?+
A full count at year end is the minimum. Cycle counting through the year is better, because a variance is traced to a fortnight rather than a whole year.
How do I record shrinkage?+
As an expense supported by the count records showing expected against actual. Breaking the variance down by cause is more useful than recording a single number.
When can I write down aged stock?+
Where the realistic selling price net of selling costs is below landed cost, supported by markdown or clearance evidence rather than a year-end judgement.
How should returns be recorded?+
As contra revenue rather than netted into sales, with the cost reversed and the unit restored to inventory where it is resaleable.
How is an exchange different from a return?+
An exchange is two transactions: the original sale reversed and a new sale recorded. Treating it as one adjustment loses both the return data and the new sale.
Are gift cards revenue when sold?+
No. A gift card sale is a liability until redeemed. Provincial consumer protection rules restrict expiry, so the balance can persist for years.
How do I handle layaway deposits?+
As a liability until the customer takes the goods. The sale is recorded on completion, not when the deposit is taken.
Should card sales be recorded gross or net?+
Gross, with the processing fee as a separate expense. Recording the net deposit understates revenue and loses the fee as a deduction.
How is cost of goods sold calculated?+
Opening inventory plus purchases at landed cost, less closing inventory, adjusted for supplier returns and write-offs, with shrinkage shown separately where possible.
Which reports show whether the store is profitable?+
Gross margin by category and sell-through rate together. A good headline margin with poor sell-through is margin that has not been discounted yet.
How are store fixtures classified?+
Free-standing shelving, seating and display units generally sit in Class 8 at 20%. Anything fixed to leased premises is a Class 13 leasehold improvement over the lease term.
Are staff discounts a taxable benefit?+
They can be, where the discount is not available to the general public and the price falls below your cost. The amount being modest does not remove the obligation.
How long do I have to claim input tax credits on imports?+
Generally four years, after which the entitlement is lost. A store sitting on unclaimed import tax should check how far back it can still go.
Sixteen questions and one underneath most of them: what did that pair actually cost you. Landed cost decides the margin, the valuation and the write-down together. Figures changed for privacy.
The Shoe Store Bookkeeping Checklist
The Bookkeeping Checklist
Quick Reference
Inventory and Cost
- Build landed cost from invoice price, duty, inbound freight and brokerage.
- Keep GST paid at the border out of cost, since it is recoverable.
- Allocate duty at the rate applying to each line, not one blended rate.
- Apply a consistent valuation method and do not change it without reason.
- Carry stock at the lower of cost and net realisable value.
- Count by SKU including size and width, not by style.
- Cycle count through the year rather than relying on one annual count.
- Investigate variances by cause before posting a shrinkage adjustment.
- Run an aged inventory report and decide on anything past a year.
- Log damaged and mismatched stock with the reason and date.
Sales and Returns
- Record gross sales with discounts shown separately.
- Record card sales at gross with the processing fee as an expense.
- Count the till daily and reconcile it to the deposit.
- Reverse chargebacks against the original sale.
- Show returns as contra revenue rather than netting them into sales.
- Reverse the cost and restore resaleable returns to inventory.
- Record exchanges as a reversal plus a new sale.
- Adjust the tax charged when a refund is given.
- Hold gift cards, store credit and layaway deposits as liabilities.
- Track return rate by brand to spot sizing problems.
Expenses, People and Filing
- Split the fit-out between Class 8 fixtures and Class 13 leasehold.
- Review whether the reinstated investment incentive applies to recent purchases.
- Code rent, utilities and occupancy by location.
- Run all staff through payroll with proper source deductions.
- Report staff discounts that fall below cost as a taxable benefit.
- File T4 and T4A slips by the last day of February.
- Claim input tax credits within the period allowed, including import tax.
- Hold the customs accounting document for every import claim.
- Move inter-store transfers at cost, recorded on both sides.
- Keep six years of records including count sheets and broker invoices.
For help with your store’s books, contact Gondaliya CPA at info@gondaliyacpa.ca, call 647-212-9559, or book a free consultation.
Thirty points and one underneath them: know the landed cost and know what is on the shelf. Every footwear correction we make comes back to one of those two. Figures changed for privacy.
Footwear Retailers We Serve
Industry Expertise
Which issue dominates differs by the retailer. Here are ten and the usual focus.
| Footwear Retailer | Where the Bookkeeping Concentrates |
|---|---|
| Independent store importing directly | Landed cost including duty and brokerage |
| Store buying from Canadian distributors | Freight in and supplier credits |
| Athletic and sneaker specialist | Fast turns and markdown timing |
| Comfort and orthopaedic footwear | Deep size and width matrix |
| Work and safety boot retailer | Commercial accounts and receivables |
| Children’s footwear | Rapid seasonal turnover and aged stock |
| Store selling online and in store | Return rates and platform payouts |
| Multi-location chain | Transfers, per-store margin and occupancy |
| Store carrying high gift card volume | Deferred revenue and expiry rules |
| Behind on the books | Count and valuation before returns are prepared |
- Independent store importing directly: Duty is a real cost that belongs in inventory.
- Store buying from Canadian distributors: Freight in still capitalises; credits still reduce cost.
- Athletic and sneaker specialist: A style that ages is a style you will discount.
- Comfort and orthopaedic footwear: Depth ties up cash in units that sell slowly.
- Work and safety boot retailer: Account sales bring receivables and bad debts.
- Children’s footwear: Aged stock is worth what clearance pays, not what you paid.
- Store selling online and in store: Platform payouts are net; your books need gross.
- Multi-location chain: Transfers move at cost, not retail.
- Store carrying high gift card volume: The liability can outlast several years.
- Behind on the books: Count first, or the return gets prepared twice.
The retailer changes where the bookkeeping concentrates. It does not change the method, which is build the landed cost, count the stock properly, then keep returns and markdowns visible. Figures changed for privacy.
Professional Guidance and Quick Reference
Guidance
Professional Guidance for Retailers: How Gondaliya CPA Handles Your File
Shoe stores lose money in a predictable set of ways: costing stock at the supplier invoice price when duty, freight and brokerage make the real landed cost materially higher, putting recoverable border GST into inventory where it does not belong, netting returns into sales so a brand with a sizing problem stays invisible, recording processor payouts net so both revenue and the fee disappear, carrying aged stock at full cost when a broken size run will never sell at that price, taking gift card sales into revenue, and expensing a fit-out that belongs partly in Class 13. Gondaliya CPA handles footwear retail bookkeeping on a fixed annual fee.
We handle what decides the outcome: building landed cost from the invoice, duty, freight and brokerage while keeping recoverable tax out of it, allocating those costs across a mixed shipment on a consistent basis, applying a valuation method and carrying stock at the lower of cost and net realisable value, supporting write-downs with markdown evidence, running counts by SKU with variances investigated by cause, keeping returns and markdowns as separate visible lines, tracking gift card and layaway liabilities, and splitting the fit-out between Class 8 and Class 13.
Our team starts with a broker invoice and an inventory valuation report, because those two show immediately whether the cost is built correctly and whether the stock figure means anything. Independent store, specialist retailer or multi-location chain, you get clear advice and a fixed price before we start.
Quick Answers
- Landed cost: Invoice plus duty, freight and brokerage
- Border GST: Recoverable, so not in cost
- Valuation: Lower of cost and net realisable value
- Returns: Contra revenue, never netted into sales
- Exchanges: A reversal plus a new sale
- Gift cards: A liability until redeemed
- Card sales: Gross, fee as an expense
- Fixtures: Class 8 at 20%, fit-out Class 13
- Input tax credits: Generally four years to claim
- Records: Six years retention
Who This Is For
- For: Incorporated shoe stores, independent footwear retailers, specialist and multi-location chains, and retailers selling both in store and online across Canada.
- Not For: Tariff classification and customs valuation, which are matters for the Canada Border Services Agency and a licensed customs broker rather than accounting.
People Also Ask
Should freight to customers go into inventory cost?+
No. Inbound freight bringing stock to your store is part of cost. Outbound shipping to a customer is a selling expense.
How do I handle inter-store transfers?+
Move the inventory at cost rather than retail, recording both sides. Only the location margin changes, not the consolidated result.
What if my inventory has never reconciled to a count?+
That gap is itself the issue. Start with a full count, investigate the variance, then correct the valuation before preparing any return.
Glossary of Key Terms
- T2: The corporation income tax return.
- Landed cost: Invoice price plus duty, freight and brokerage.
- Customs duty: A non-recoverable import charge that belongs in cost.
- Brokerage: The customs broker’s fee, attributable to the import.
- Net realisable value: What stock will realistically sell for, less selling costs.
- Write-down: Reducing carrying value where cost exceeds realisable value.
- Shrinkage: Stock loss from theft, damage or receiving error.
- Cycle count: Counting part of the stock regularly through the year.
- Sell-through: The proportion of a buy that has sold.
- Inventory turns: How many times stock cycles in a year.
- Contra revenue: Returns and discounts shown against sales, not netted in.
- Deferred revenue: Gift card and layaway money held as a liability.
- Class 8: The 20 percent class covering free-standing fixtures.
- Class 13: Leasehold improvements over the lease term.
- Input tax credit: GST/HST recoverable on business purchases and imports.
- Compilation engagement: Financial statements prepared under CSRS 4200.
Shoe Store Readiness Check
This quick self-check indicates where your operation most likely has room. Please answer the six questions below.
Shoe Store Readiness Check
Six quick questions on your store. No fee shown.
Points to raise with us:
This is a general prompt, not tax or legal advice or a quote. Your position depends on your full facts. For a real review, please book a free consultation.
Want a checklist to work from? You can download our free shoe store bookkeeping checklist before your consultation.
Build landed cost from invoice, duty, freight and brokerage, keeping recoverable border tax out of it. Count by SKU including size and width. Carry stock at the lower of cost and net realisable value. Show returns and markdowns as separate visible lines. Record card sales at gross. Hold gift cards and layaway as liabilities. Split the fit-out between Class 8 and Class 13. Please keep six years of records.
2026 Update — what is current: This article reflects rules current to 2026. The $30,000 GST/HST registration threshold measured across four consecutive calendar quarters, the Class 8 rate of 20%, Class 13 leasehold treatment over the lease term, the six-month T2 filing deadline, the 5% plus 1% per month late-filing penalty, the end-of-February slip deadline and the six-year retention requirement are unchanged. Bill C-15 received Royal Assent on 26 March 2026, reinstating the accelerated investment incentive for most depreciable property acquired after 2024 and available for use before 2030, with leasehold improvements among the excluded classes. Please note that GST paid at the border is recoverable through an input tax credit and should not be included in inventory cost, whereas customs duty is not recoverable and belongs in cost; that inventory valuation is governed by the inventory provisions of the Income Tax Act and the related regulation rather than the capital cost allowance schedule; that payroll source deductions arise under the Income Tax Act rather than the Excise Tax Act; and that the corporate balance owing is due three months after year-end for eligible CCPCs and otherwise two.
Shoe Store Bookkeeping Canada: How Gondaliya CPA Supports Footwear Retailers
Start with a broker invoice
Gondaliya CPA builds landed cost from the invoice, duty, freight and brokerage while keeping recoverable tax out of it, allocates those costs across mixed shipments on a consistent basis, applies a valuation method and carries stock at the lower of cost and net realisable value, supports write-downs with markdown evidence, runs counts by SKU with variances investigated by cause, keeps returns and markdowns as separate visible lines, tracks gift card and layaway liabilities and splits the fit-out between Class 8 and Class 13, on a flat annual fee including HST with a one-business-day response. Please book a free consultation.
Next Steps
Please book a free consultation with Gondaliya CPA and bring a recent import shipment file with the broker invoice, an inventory valuation report, and your last filed corporate return. Those three tell us immediately whether landed cost is built properly, whether the stock figure means anything, and what remains to claim on the equipment, and where the documentation is thin. You will get a flat annual fee including HST before any work begins. If our content helps, please add gondaliyacpa.ca as a preferred source on Google.
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Editorial policy: We research against CRA and CPA Ontario sources, fact-check the figures, and Sharad Gondaliya, CPA, reviews the content, which we update as the rules change.
Disclaimer: This article is educational information only and is not tax, legal, or financial advice. Figures marked illustrative are examples rather than quotes or guarantees. It reflects CRA rules current to 2026, including the $30,000 GST/HST threshold, the Class 8 rate, Class 13 leasehold treatment, the half-year rule, and the six-year retention requirement. Rates, limits and expensing rules change and outcomes depend on your specific facts. Please consult a licensed CPA before acting.
Sharad Gondaliya is a CPA Canada & CPA USA with 15 Years+ experience of Accounting, Tax, Payroll of Corporate Small Businesses as Tax Accountant. He is fully certified CPA Ontario and CPA USA and is well known among corporate small businesses for tax planning, efficient tax solutions, and affordable CPA services. Sharad is the Principal (Director) of Gondaliya CPA – Affordable CPA Firm in Canada. Licenses: CPA Ontario: 61040184 | CPA USA (MT): PAC-CPAP-LIC-033176 | CPA USA (WA): 57629 | CPA Firm License: 61330051 View Full Author Bio