2026 Updated · 60+ Checklist Items · All Industries
Year-End Bookkeeping Checklist for Canadian Businesses
The complete year-end bookkeeping checklist every Canadian business needs to close the books accurately, prepare for the T2 return and start the new year clean. Organised by category with priority tags — bank reconciliation, receivables, payables, payroll, HST, CCA, shareholder loans, adjusting entries and more.
Jump to Checklist Year-End Timeline60+Checklist ItemsAcross 10 categories
30 DaysTarget CloseBooks closed within 30 days of YE
Feb 28T4/T5 DeadlineSlips due to employees
6 MonthsT2 Filing DeadlineAfter fiscal year-end
6 YearsRecord RetentionCRA minimum requirement
Table of Contents
1. Why Year-End Bookkeeping Matters
2. Year-End Timeline — What to Do and When
3. The Complete Year-End Checklist
— Bank and Cash Accounts
— Accounts Receivable
— Accounts Payable and Accruals
— Payroll and Benefits
— GST/HST
— Fixed Assets and CCA
— Shareholder Accounts
— Revenue and Expense Review
— Adjusting Journal Entries
— Final Close and Reporting
4. Year-End Close in QuickBooks and Xero
5. Frequently Asked Questions
1. Why Year-End Bookkeeping Matters
Year-end bookkeeping is not an administrative chore — it is the foundation of your corporate tax return. Every number on your T2 originates from your year-end financial statements. If the books are not closed properly — bank accounts not reconciled, receivables not reviewed, prepaid expenses not adjusted, shareholder loans not tracked — your CPA receives an incomplete data set and must either reconstruct the missing information (increasing fees) or file the return with inaccurate numbers (increasing audit risk).
A properly closed set of books produces a trial balance where every account has been reviewed, reconciled or adjusted. The balance sheet matches reality — cash matches the bank, receivables match outstanding invoices, payables match unpaid bills, loans match lender statements and retained earnings roll forward correctly from the prior year. The income statement captures all revenue earned and all expenses incurred during the fiscal year — not the year before, not the year after. When your CPA receives this clean data set, the T2 preparation is faster, the fees are lower and the return is accurate enough to survive a CRA review without adjustment.
2. Year-End Timeline — What to Do and When
The following timeline assumes a December 31 fiscal year-end. Adjust dates proportionally for non-calendar year-ends.
December 1–31 — Before Year-End
Pre-Close Preparation
Review open invoices and collect outstanding receivables before year-end. Process all supplier invoices received by December 31. Make any planned equipment purchases to capture current-year CCA. Declare and pay any planned dividends (directors resolution required before payment). Confirm shareholder loan balance and make repayment if Section 15(2) deadline is approaching. Review payroll records and process final pay period.
January 1–31 — First 30 Days After Year-End
Core Year-End Close
Reconcile all bank accounts to December 31 statements. Review and age accounts receivable — write off confirmed bad debts. Review accounts payable — accrue expenses incurred but not yet invoiced. Post adjusting journal entries (prepaids, depreciation, accrued liabilities). Reconcile HST account to CRA balance. Reconcile shareholder loan account. Generate final trial balance, income statement and balance sheet. Send complete document package to your CPA.
February 28 — T4 and T5 Deadline
Information Slips
T4 slips (employment income) and T5 slips (dividends paid) must be filed with CRA and issued to recipients by the last day of February following the calendar year. T4 Summary must reconcile to total salary expense on the income statement. T5 slips must match dividend resolutions in the corporate minute book.
March 31 — Tax Payment Deadline (CCPC)
Corporate Tax Balance Due
The balance of corporate tax owing for qualifying small CCPCs is due three months after year-end. Your CPA should have an estimated tax liability from the year-end financial statements by this date. Pay the estimated balance even if the T2 is not yet filed — this eliminates both interest and the late filing penalty (which is calculated on the balance owing).
June 30 — T2 Filing Deadline
Corporate Tax Return Due
The T2 return must be filed within six months of the fiscal year-end. If you sent your complete document package to your CPA by January 31, the return should be prepared, reviewed, approved and filed well before this deadline.
3. The Complete Year-End Bookkeeping Checklist
The following checklist covers every task required to close your books at year-end and prepare a clean data set for your CPA. Each item is tagged by priority: Critical (must complete — T2 cannot be filed without it), Important (strongly recommended — affects accuracy) or Recommended (best practice for clean books).
1
Bank and Cash Accounts
8 items
Reconcile every bank account to the December 31 statementCriticalEvery bank account — chequing, savings, USD — must be reconciled to the year-end bank statement. The reconciled balance on your books must match the bank statement balance after accounting for outstanding cheques and deposits in transit. This is the first thing CRA checks on audit.
Reconcile credit card accounts to December 31 statementsCriticalEvery business credit card balance must match the statement balance at year-end. Unreconciled credit card transactions are one of the most common sources of duplicate or missing expense entries.
Review and clear outstanding cheques older than 6 monthsImportantCheques that have been outstanding for more than six months should be investigated. If the cheque will not be cashed, reverse the entry and restore the amount to the relevant expense or payable account.
Record all deposits in transit as at December 31CriticalRevenue received before year-end but not yet deposited or cleared by the bank must be recorded. Deposits in transit appear on the bank reconciliation and affect the cash balance on the balance sheet.
Reconcile petty cash to the physical countRecommendedIf you maintain a petty cash fund, count the physical cash and reconcile to the petty cash account in your books. Record any unrecorded receipts and post any shortage or overage.
Convert and record foreign currency balances at the December 31 exchange rateImportantUSD bank accounts and any other foreign currency balances must be converted to Canadian dollars using the Bank of Canada noon rate on December 31. Record the exchange gain or loss as an adjusting entry.
Verify intercompany balances with related entitiesImportantIf your corporation has transactions with a holding company, sibling corporation or related entity, confirm that the intercompany receivable on your books matches the intercompany payable on theirs. Unreconciled intercompany balances are a common audit trigger.
Confirm line of credit balance matches lender statementImportantBusiness line of credit, term loan and mortgage balances on your books must match the lender's year-end statement. Record any accrued interest payable as at December 31.
2
Accounts Receivable
5 items
Generate and review an aged accounts receivable report as at December 31CriticalThe total of the aged AR report must match the accounts receivable balance on the trial balance. Review each outstanding invoice — confirm it is a genuine receivable, not a billing error or a duplicate entry.
Write off confirmed bad debtsCriticalInvoices that are genuinely uncollectible must be written off as bad debt expense in the fiscal year. This creates the income tax deduction and triggers the GST/HST bad debt adjustment (13/113 of the uncollected Ontario amount). Do not carry uncollectible invoices in AR year after year.
Ensure all December revenue is invoicedCriticalRevenue earned before December 31 must be invoiced and recorded as revenue in the current year — even if the invoice is not sent until January. Accrual-basis accounting requires revenue recognition when earned, not when invoiced or collected.
Record deposits received as deferred revenue if not yet earnedImportantCustomer deposits or advance payments for work to be completed after year-end must be recorded as deferred revenue (a liability), not as current-year income. Revenue is recognised when the service is delivered or the goods are shipped.
Review retainer balances and work-in-progressImportantFor service businesses that bill on retainer or track WIP, review all unbilled time and determine how much should be recognised as revenue at year-end vs. carried forward as WIP into the new year.
3
Accounts Payable and Accruals
6 items
Generate and review an aged accounts payable report as at December 31CriticalThe AP report total must match the accounts payable balance on the trial balance. Review each outstanding bill — confirm it has not already been paid (duplicate entry) and that the amount matches the supplier's invoice.
Accrue expenses incurred but not yet invoicedCriticalIf you received goods or services before December 31 but the supplier's invoice arrives in January, accrue the expense at year-end. Common accruals include: CPA fees for T2 preparation, legal fees for ongoing matters, utilities consumed in December and contractor work completed before year-end.
Accrue interest payable on loans and credit facilitiesImportantInterest that has accrued on business loans, lines of credit and mortgages up to December 31 but is not yet due for payment must be recorded as an accrued liability. The interest expense is deductible in the year it accrues, not the year it is paid.
Accrue vacation pay owing to employeesImportantEarned but unpaid vacation pay as at December 31 is a liability and an expense of the current year. Calculate the accrual based on each employee's unused vacation days multiplied by their current daily rate.
Accrue corporate income tax payableImportantEstimate the corporate income tax liability for the year and record it as a year-end accrual. This ensures the balance sheet reflects the tax obligation. Your CPA will adjust the accrual to the exact amount when the T2 is prepared.
Review and clear aged payables older than 12 monthsRecommendedSupplier invoices outstanding for more than 12 months that will not be paid should be reversed. Carrying stale payables inflates liabilities and can create confusion when the supplier's records do not match yours.
4
Payroll and Benefits
6 items
Reconcile total salary and wages expense to T4 SummaryCriticalThe total employment income on all T4 slips must equal the salary and wages expense on the income statement. Any difference must be investigated and corrected before the T4 Summary is filed. CRA cross-references T4 totals against the T2 salary expense.
Reconcile payroll remittances to CRA accountCriticalTotal CPP, EI and income tax deducted and remitted during the year must match CRA's payroll account balance. Log into CRA My Business Account and confirm. Any discrepancy must be resolved before filing T4s.
Prepare and file T4 slips and T4 Summary by February 28CriticalT4 slips must be issued to all employees and filed with CRA by the last day of February following the calendar year. Include the owner-manager's T4 if salary was paid. Late filing penalty is $100 plus $25 per day per slip.
Prepare T5 slips for dividends paid during the calendar yearCriticalT5 slips must be issued for all dividends paid to shareholders during the calendar year. The slips must specify eligible vs. non-eligible dividend designation matching the directors resolution in the minute book. Due February 28.
Review taxable benefits and add to T4 slipsImportantTaxable benefits provided to employees (personal use of company vehicle, group life insurance premiums above $25K, parking, gift cards over $500 annually) must be added to the employee's T4 slip. Missing taxable benefits is a common payroll audit finding.
Confirm owner-manager salary vs. dividend split for the yearImportantReview the salary and dividends paid to the owner-manager during the year. Confirm the split is optimal for RRSP room generation, CPP contributions and overall tax efficiency. Your CPA can adjust the final pay or dividend before year-end if the current split is suboptimal.
5
GST/HST
5 items
Reconcile HST collected and ITCs claimed to GST/HST returns filedCriticalTotal HST collected in your books must match total HST reported on all GST/HST returns filed during the year. Total ITCs claimed must also reconcile. Any difference indicates a filing error or a missed return period.
Reconcile HST payable/receivable to CRA My Business AccountCriticalThe HST payable (or receivable) balance on your books must match CRA's account balance. Log into My Business Account and compare. Differences typically result from missed payments, assessment adjustments or returns not yet processed.
Ensure all ITCs have valid supporting invoicesImportantEvery ITC claimed during the year must be supported by a supplier invoice showing their GST/HST registration number (for invoices $150 or more). Review a sample of ITC claims and confirm documentation is on file.
Review meals and entertainment ITCs for 50% restrictionImportantConfirm that ITCs on meals and entertainment have been restricted to 50% in your books. If your accounting software does not automatically restrict meals ITCs, post a year-end adjustment to reverse the excess 50%.
File any outstanding GST/HST returns for periods ending before year-endCriticalAll GST/HST returns for periods ending on or before your fiscal year-end should be filed before you close the books. Outstanding returns create payable discrepancies and can trigger CRA compliance flags.
6
Fixed Assets and CCA Preparation
5 items
List all capital assets acquired during the year with purchase invoicesCriticalProvide your CPA with a list of every capital asset purchased: description, date acquired, cost (before HST) and the purchase invoice. Your CPA assigns the correct CCA class and calculates Schedule 8. Missing a purchase means missing the CCA deduction.
List all capital assets disposed of during the yearCriticalProvide details of any asset sold, traded in or scrapped: description, date of disposition, proceeds received (or $0 for scrapped items) and any trade-in documentation. Required for recapture, terminal loss or capital gain calculations on Schedule 8.
Confirm vehicle business-use percentage with mileage logbookCriticalIf the corporation owns or leases a vehicle used partly for personal driving, confirm the business-use percentage for the year using the mileage logbook. This percentage determines the deductible portion of vehicle CCA, fuel, insurance, maintenance and the ITC on those expenses.
Confirm prior year Schedule 8 closing UCC balancesCriticalYour CPA needs the closing UCC balances from last year's Schedule 8 as the opening balances for this year. If you switched CPAs, ensure the prior year Schedule 8 is provided to the new CPA before year-end close.
Review leasehold improvement recordsRecommendedIf the corporation made leasehold improvements during the year, provide the contractor invoices and the lease agreement (for remaining term calculation). Leasehold improvements are CCA Class 13 — amortised over the lease term plus one renewal.
8
Revenue and Expense Review
6 items
Review revenue for completeness — cross-reference to bank depositsCriticalTotal revenue on the income statement should be consistent with total bank deposits (adjusted for HST, loan proceeds, owner contributions and other non-revenue deposits). CRA's first revenue test on audit is comparing deposits to reported income.
Review expense accounts for personal chargesCriticalScan every expense account for personal charges that should not be deducted on the T2. Common examples: personal meals, personal travel, family cell phone plans, home internet (if no home office), personal vehicle gas charged to the business card. Reclassify as shareholder loan advances.
Confirm meals and entertainment at 50% deductibilityImportantReview the meals and entertainment expense account. Only 50% is deductible for income tax purposes. Your CPA will make the Schedule 1 adjustment, but confirming the total at year-end ensures the add-back is accurate.
Review contractor payments for T5018 reportingImportantIf your corporation is in the construction industry and paid subcontractors $500 or more, list all subcontractor payments for T5018 reporting. T5018 statements are due six months after year-end. The $250-per-day penalty for non-filing adds up quickly.
Review insurance, subscriptions and contracts for correct period allocationRecommendedAnnual insurance premiums, software subscriptions and service contracts that span two fiscal years should be allocated between years. The portion relating to the current year is an expense; the portion relating to the next year is a prepaid asset on the balance sheet.
Review charitable donations and confirm receipts on fileRecommendedCharitable donations are deductible on the T2 up to 75% of net income. Confirm all donation receipts are from registered Canadian charities (CRA registration number on receipt) and that receipts are on file for every donation claimed.
9
Adjusting Journal Entries
7 items
Record prepaid expensesImportantAny payment made before year-end for services or coverage extending into the next fiscal year must be recorded as a prepaid asset. Common prepaids: annual insurance premiums, annual software subscriptions, prepaid rent for January.
Amortise prior-year prepaids into current-year expenseImportantPrepaid assets recorded in the prior year that relate to the current year must be expensed. If a 12-month insurance policy was recorded as a $6,000 prepaid last year and 6 months fall in the current year, record $3,000 as insurance expense and reduce the prepaid by $3,000.
Record book depreciation (amortisation)ImportantPost accounting depreciation on all fixed assets per your depreciation policy. This is the book depreciation that appears on the income statement — your CPA will replace it with CCA (tax depreciation) on Schedule 1 of the T2.
Reverse prior-year accruals that have been paidImportantAccrued liabilities from the prior year-end (accrued CPA fees, accrued bonuses, accrued vacation pay) that have since been paid must be reversed. Failing to reverse creates double-counting of the expense.
Record inventory at the lower of cost or net realisable valueCriticalIf your business carries inventory, perform a physical count at year-end (or as close to year-end as possible) and value it at the lower of cost or net realisable value. The inventory balance on the balance sheet must match the physical count valuation. Inventory adjustments flow directly to cost of goods sold on the income statement.
Record income tax provisionRecommendedEstimate the corporate income tax liability for the year and record it as an adjusting entry (debit tax expense, credit income tax payable). Your CPA will finalise the exact amount during T2 preparation, but an estimated provision ensures the financial statements reflect the tax obligation.
Verify retained earnings opening balanceCriticalOpening retained earnings must equal last year's closing retained earnings (from the prior year's audited or reviewed financial statements). If there is a difference, investigate — it usually indicates an entry was posted to the prior year after the books were closed, or the prior year closing entry was not posted correctly.
10
Final Close and Reporting
6 items
Generate final trial balanceCriticalAfter all adjusting entries are posted, generate a final trial balance showing every account with its year-end balance. Total debits must equal total credits. This is the primary source document your CPA uses to prepare the T2 return.
Generate income statement and balance sheetCriticalRun the final income statement (profit and loss) and balance sheet from your accounting system. The income statement covers the full fiscal year. The balance sheet is as at the last day of the fiscal year. These become Schedule 125 and Schedule 100 on the T2.
Verify the balance sheet balances — assets = liabilities + equityCriticalThe fundamental accounting equation must hold. If assets do not equal liabilities plus equity, there is an error in the books that must be found and corrected before the data is sent to your CPA.
Lock the accounting periodImportantAfter all year-end entries are posted and the financial statements are finalised, lock the accounting period in your software (QuickBooks: Closing Date, Xero: Lock Date). This prevents accidental entries to the closed year that would change the financial statements after the T2 has been filed.
Send complete document package to your CPACriticalSend your CPA: the final trial balance, income statement, balance sheet, all 12 months of bank statements, list of capital asset purchases and dispositions, shareholder loan reconciliation, prior year T2 and Notice of Assessment, and the corporate minute book. Use our Corporate Tax Filing Checklist for the complete 53-item document list.
Back up your accounting dataRecommendedCreate a backup of your QuickBooks or Xero data as at year-end. Store the backup in a separate location from your primary data. CRA requires records to be retained for six years — a year-end backup ensures the data is preserved even if the cloud account is cancelled or corrupted.
4. Year-End Close in QuickBooks Online and Xero
QuickBooks Online
In QuickBooks Online, the year-end close process is semi-automatic. QBO does not require a formal "closing entry" — it automatically rolls net income into retained earnings when you run reports for the new fiscal year. However, you must manually set the Closing Date under Settings > Advanced > Accounting to lock the year-end period. Set a closing date password to prevent other users from posting entries to the closed year. After your CPA files the T2, post any CPA-provided adjusting entries and then update the closing date lock to the final adjusted date.
Xero
In Xero, set the Lock Date under Settings > General Settings > Financial Settings. Xero also automatically rolls net income into retained earnings. After year-end adjustments are posted, set the lock date to your fiscal year-end. Xero's lock date prevents all users (including administrators) from posting entries before the lock date without first changing the setting — providing stronger protection than QBO's password-based lock. Export a copy of the year-end trial balance and balance sheet as PDFs for your permanent records.
Need Help Closing Your Year-End Books?
Gondaliya CPA handles year-end bookkeeping close, adjusting entries and T2 preparation — flat-fee pricing, virtual across Ontario and Canada. Send us your books and we handle the rest.
Book Free Consultation Bookkeeping ServicesFrequently Asked Questions — Year-End Bookkeeping
Common questions from Canadian business owners about closing the books at year-end.
When should I close my books after year-end?
Please target 30 days after your fiscal year-end. For a December 31 year-end, your books should be closed and the complete document package sent to your CPA by January 31. This gives your CPA four to five months to prepare and file the T2 before the June 30 deadline, and it ensures the tax balance can be estimated before the March 31 payment deadline for qualifying small CCPCs. Closing early also leaves time to fix any errors before they reach the return.
What is the most important year-end bookkeeping task?
Bank reconciliation. Every bank account and credit card must be reconciled to the year-end statement before anything else, because if the bank does not reconcile, every other number on the financial statements is unreliable. CRA's first request on audit is always bank statements, and the first test is comparing the bank statement balance to the books. Please complete this before moving to receivables, payables or adjusting entries. Bookkeeping Services →
Do I need to do a physical inventory count at year-end?
Yes, if your business carries inventory for sale. CRA requires that inventory be valued at the lower of cost or net realisable value as at the fiscal year-end, and a physical count is the only reliable way to confirm the quantity on hand. The count can be done within a few days of year-end, with appropriate adjustments for sales and receipts between the count date and the actual year-end date. The counted value must match the inventory balance on the balance sheet.
What happens if my shareholder loan is not repaid by year-end?
Under Section 15(2) of the Income Tax Act, a shareholder loan that remains outstanding at the end of the corporation's second fiscal year following the year the loan was made is included in the shareholder's personal income, meaning the shareholder pays personal tax on the entire loan amount as if it were salary. The loan must be repaid with a bona fide repayment, not a circular cheque, by the deadline to avoid this inclusion. Please track the balance carefully all year. Get CPA Advice →
Should I lock my accounting period after year-end close?
Yes, please always lock the period in your accounting software after all year-end entries are posted. In QuickBooks Online, set the Closing Date under Settings then Advanced. In Xero, set the Lock Date under Settings then General Settings. This prevents accidental entries to the closed year that would change your financial statements after the T2 has been filed. If your CPA provides additional adjusting entries after the lock, temporarily unlock, post the entries and then re-lock the period.
What adjusting entries are most commonly needed at year-end?
The most common year-end adjusting entries are prepaid expense allocations for insurance and subscriptions, accrued liabilities such as CPA fees, vacation pay and interest payable, bad debt write-offs, book depreciation, inventory adjustments, foreign exchange revaluation and the income tax provision. Your CPA may also provide entries for CCA adjustments, GIFI reclassifications and retained earnings corrections after reviewing your year-end data. Posting these correctly is what turns a rough trial balance into a clean, filing-ready set of books.
How much does year-end bookkeeping cost with a CPA?
Gondaliya CPA includes year-end close in our monthly bookkeeping packages starting from $100 per month including HST. If you maintain your own books during the year and only need year-end close and T2 preparation, our flat-fee T2 filing starts from $400 including HST. Under our 60-Day Fees-Matching Policy, we match any lower written quote from a licensed Ontario CPA firm for the same scope. Payment is by Interac e-Transfer to info@gondaliyacpa.ca. Know Your Exact Fee →
What documents does my CPA need to close my year-end?
Please send the final trial balance, income statement and balance sheet, all twelve months of bank and credit card statements, a list of capital asset purchases and dispositions with invoices, the shareholder loan reconciliation, the prior-year T2 and Notice of Assessment, and the corporate minute book with any dividend resolutions. A complete package lets your CPA prepare the T2 without back-and-forth, which keeps the fee down and the return accurate. Our Corporate Tax Filing Checklist lists all 53 documents across 10 categories.
What is the difference between book depreciation and CCA at year-end?
Book depreciation is the accounting expense you post on your income statement based on your own depreciation policy, while CCA is the tax version of depreciation calculated on Schedule 8 using the prescribed rates in the Income Tax Act. At year-end you post book depreciation, then your CPA adds it back on Schedule 1 and deducts CCA instead. The two figures are almost never the same, which is why the swap on Schedule 1 is a standard year-end adjustment on every T2.
When are T4 and T5 slips due after year-end?
T4 slips for employment income and T5 slips for dividends paid must be filed with CRA and issued to recipients by the last day of February following the calendar year, which is February 28 in a normal year. The T4 Summary must reconcile to the salary and wages expense on your income statement, and the T5 slips must match the dividend resolutions in your minute book. The late-filing penalty starts at $100 per slip type and grows daily, so please prepare these early.
What is the T2 filing deadline and payment deadline after year-end?
The T2 return must be filed within six months of the fiscal year-end, so a December 31 year-end has a June 30 filing deadline. The tax balance, however, is due earlier, two months after year-end, or three months for a qualifying small CCPC. Because the payment deadline comes first, please pay an estimate by then even if the return is not finished, since late payment triggers daily compounding interest and the late-filing penalty is calculated on the unpaid balance.
How do I reconcile my HST account at year-end?
Please confirm that the total HST collected in your books matches the HST reported on every GST/HST return filed during the year, and that the total ITCs claimed also reconcile. Then compare the HST payable or receivable balance on your books to CRA My Business Account. Differences usually come from a missed payment, an assessment adjustment or a return that has not yet processed. Any outstanding GST/HST return for a period ending on or before year-end should be filed before you close the books.
What is a deposit in transit and why does it matter at year-end?
A deposit in transit is revenue you received and recorded before December 31 that the bank has not yet cleared by the statement date. It appears on your bank reconciliation as a reconciling item and affects the cash balance reported on your balance sheet. Recording deposits in transit correctly ensures revenue is captured in the right fiscal year and that your reconciled cash matches the bank statement once the timing difference is accounted for. Missing them understates both cash and revenue.
How do I handle bad debts at year-end?
Invoices that are genuinely uncollectible should be written off as bad debt expense in the fiscal year, which creates the income tax deduction and triggers the GST/HST bad debt adjustment, being 13/113 of the uncollected Ontario amount. Please do not carry uncollectible invoices in accounts receivable year after year, because that overstates both receivables and income. Review the aged receivable report, confirm which accounts are truly uncollectible, and write those off before generating the final trial balance.
What is deferred revenue and when do I record it?
Deferred revenue is money you have received for work or goods that will be delivered after year-end. Because accrual accounting recognises revenue when it is earned, a customer deposit or advance payment for future work is recorded as a liability at year-end, not as current-year income, and it is moved to revenue only when the service is delivered or the goods are shipped. Recording deferred revenue correctly prevents overstating income in the current year and paying tax early on money not yet earned.
How do I record foreign currency bank balances at year-end?
USD accounts and any other foreign currency balances must be converted to Canadian dollars using the Bank of Canada exchange rate on the year-end date, and the resulting exchange gain or loss is posted as an adjusting entry. This applies to the balance itself, while individual transactions during the year are recorded at the rate on their transaction dates. Getting the year-end revaluation right keeps your balance sheet accurate and correctly reports the unrealised gain or loss for the period.
What payroll items must I reconcile before filing T4s?
Please reconcile the total employment income on all T4 slips to the salary and wages expense on your income statement, and reconcile the CPP, EI and income tax withheld and remitted during the year to CRA's payroll account balance in My Business Account. Any difference must be resolved before the T4 Summary is filed, because CRA cross-references T4 totals against the T2 salary expense. You should also confirm any taxable benefits are added to the correct employee slips.
What taxable benefits do I need to add to employee T4s?
Common taxable benefits that must be added to an employee's T4 include personal use of a company vehicle, employer-paid group life insurance premiums on coverage above $25,000, employer-provided parking, and gift cards or near-cash gifts over the annual threshold. These benefits are part of employment income and attract source deductions. Missing them is a frequent payroll audit finding, so please review what the corporation provided to each employee during the year before the slips are finalised.
How do I confirm my owner-manager salary versus dividend split at year-end?
Please review the salary and dividends actually paid to the owner-manager during the year and confirm the mix supports your goals for RRSP room, CPP contributions and overall tax efficiency. Year-end is the last practical point to adjust a final bonus accrual or declare a dividend before the year closes. Because the optimal split depends on your personal situation and the corporation's income, we model it for owner-managed clients before the books are locked. Salary vs Dividend Calculator →
What are prepaid expenses and how are they handled at year-end?
A prepaid expense is a payment made before year-end for coverage or services extending into the next fiscal year, such as an annual insurance premium, a yearly software subscription or January rent paid in December. At year-end the future portion is recorded as a prepaid asset on the balance sheet rather than a current expense, and it is expensed in the period it relates to. You also expense the current-year portion of any prepaid recorded last year. This matches expenses to the correct period.
Do I need to accrue expenses at year-end that I have not been invoiced for?
Yes. If you received goods or services before year-end but the supplier's invoice arrives in January, the expense is accrued as a liability at year-end so it lands in the correct fiscal year. Common accruals include CPA fees for the upcoming T2 preparation, legal fees for ongoing matters, December utilities and contractor work completed before year-end. Accruing these correctly ensures your income statement reflects all expenses actually incurred during the year, not just those already invoiced.
How do I verify my retained earnings at year-end?
Opening retained earnings for the year must equal the closing retained earnings from the prior year's finalised financial statements. If the two do not match, please investigate before sending the file to your CPA, because a difference usually means an entry was posted to the prior year after it was closed, or the prior-year closing entry was not posted correctly. Confirming this roll-forward is a quick check that prevents a cascade of errors flowing into the current-year balance sheet and the T2.
What is the T5018 and do I need to file it at year-end?
The T5018 is the Statement of Contract Payments required from businesses in the construction industry that paid subcontractors for construction services. If you paid a subcontractor $500 or more in the reporting period, those payments must be reported on a T5018, which is due six months after your reporting period end. Please list all qualifying subcontractor payments during your year-end review, because the non-filing penalty accrues daily. If construction is not your primary activity, this requirement may not apply to you.
How do I review my expenses for personal charges at year-end?
Please scan every expense account for charges that are personal rather than business, such as personal meals, personal travel, a family cell phone plan, home internet where there is no home office, or personal fuel charged to the business card. These should be reclassified as shareholder loan advances rather than deducted on the T2. Misclassifying personal costs as business deductions is one of the most common CRA audit adjustments, so catching them at year-end protects the return and keeps the shareholder loan accurate.
What is the meals and entertainment 50% rule at year-end?
Only 50% of most meals and entertainment expenses is deductible for income tax, and only 50% of the related ITC is claimable for GST/HST. At year-end, please confirm the meals and entertainment total so the Schedule 1 add-back is accurate, and if your software did not restrict the ITC automatically, post an adjustment to reverse the excess half. A handful of exceptions exist, such as certain staff events, but the standard rule for client and business meals is the 50% restriction.
How do I reconcile intercompany balances at year-end?
If your corporation transacts with a holding company, a sibling corporation or another related entity, the intercompany receivable on your books must equal the intercompany payable on theirs as at year-end. Please reconcile both sides and clear any difference before closing, because unreconciled intercompany balances are a common audit trigger and can distort both companies' balance sheets. Where management fees flow between related companies, confirm the fee is recorded in both sets of books and supported by a written agreement at fair value.
What capital asset information does my CPA need for CCA at year-end?
Please provide a list of every capital asset purchased during the year with its description, acquisition date, cost before HST and the purchase invoice, along with details of any asset sold, traded in or scrapped, including proceeds. Your CPA uses this to assign the correct CCA class and prepare Schedule 8, and to calculate any recapture, terminal loss or capital gain on dispositions. Missing a purchase means missing a CCA deduction, and missing a disposition can misstate the pools carried forward.
How do I handle vehicle expenses and the business-use percentage at year-end?
If the corporation owns or leases a vehicle used partly for personal driving, please confirm the business-use percentage for the year from the mileage logbook. That percentage determines the deductible portion of vehicle CCA, fuel, insurance and maintenance, and the claimable portion of the related ITC. A contemporaneous logbook is the support CRA looks for, so the percentage is defensible. Personal-use kilometres also feed the taxable benefit calculation where the corporation provides the vehicle to an employee or owner-manager.
What does the year-end balance sheet check involve?
The core check is that assets equal liabilities plus equity. After all adjusting entries are posted, please confirm this equation holds, because if it does not, there is an error in the books that must be found and corrected before the data goes to your CPA. You should also confirm that cash matches the reconciled bank, receivables match the aged AR report, payables match the aged AP report, loan balances match lender statements and shareholder loan balances match your reconciliation. This is what makes the file filing-ready.
Can Gondaliya CPA handle my full year-end close and T2 filing?
Yes. We handle the complete year-end close, all adjusting journal entries, reconciliations, T4 and T5 slips where needed, and the full T2 filing, virtually for corporations across Ontario and Canada through our secure TaxDome portal. Year-end close is included in monthly bookkeeping from $100 per month including HST, and standalone T2 filing starts from $400 including HST with the director's T1 and CRA audit support included. Payment is by Interac e-Transfer to info@gondaliyacpa.ca. Book Free Consultation →
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