From Dollars to Cents - An Accounting and Tax Blog Keeping You Up-To-Date on the Latest Bookkeeping & Tax Tips


Keeping Receipts - The Key to Good Bookkeeping and Maintaining Deductions


There are countless rulings from Canada Revenue Agency in which people have lost their deductions to poor, or sometimes non-existent, record keeping, which can sometimes result in financially large tax liabilities for these people.

A common, but mistaken belief, is that you do not need to keep the receipt for a transaction when you charge all business expenses on a credit card. The purpose for keeping a legible receipt is in the event of a CRA audit. The CRA will NOT simply accept a line item on a credit card statement saying that you purchased a item or service for business purposes, as you are unable to support the exact nature of the expenses as it pertains to a business-related activity. You therefore must keep either the original receipt or a legible copy of it.

Another tip - the thermal printer ink on original receipts can fade within a remarkably short period of time after being issued by the vendor. It is always good bookkeeping practice to make a copy of receipts as soon as possible after the transaction; even better is to scan the original receipt. Computerized scans of receipts are much easier for organizational and archival purposes.

If you are unable to produce the receipt, the auditor can say that you purchased the items for a personal reason as opposed to a business-related activity, as you are simply unable to support your claim for the business deduction with evidence to that effect. In this event, the deduction would simply be denied.

There is one other very important reason for keeping track of your business receipts. Receipts are the only way to quantify GST/HST that you may have paid on a business-related transaction, for which you may be able to claim an Input Tax Credit on your business. ITC claims can be sizeable, particularly in the purchase of expensive capital items. In the event of a GST/HST audit by CRA, you can bet that large transactions will be scrutinized, and unless you are able to produce an expense receipt, the claim for that ITC credit will be disallowed.

An ancillary benefit to keeping good records of receipts is for warranty claims on items that you have purchased. All warranty claims need to be supported by original receipt, or else the manufacturer will not required to honour the warranty claim.

The bottom line? You need to be able to PROVE every transaction that you make for your business. The best way to do this and protect yourself against the loss of business deductions is to keep supporting documentation of all business-related expenses in an organized manner. Keep yourself one step ahead of the tax man at all times!

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