Cash sales: the records the CRA expects you to keep
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Every sale needs a record with its date, amount and source, backed by an original document and kept for six years.
Short answer: a business has to keep records of all its transactions to support its income and expense claims. For cash sales that means a daily record of income, with the date, amount and source of each, supported by original documents such as sales invoices, cash register tapes, receipts and bank deposit slips, kept for six years from the end of the last tax year they relate to.
What the records have to show
- A daily record of income and expenses.
- For income, the date, the amount and the source of each item.
- Original documents that support each income entry: sales invoices, cash register tapes, receipts, bank deposit slips, fee statements and contracts.
- Duplicate deposit slips, bank statements and cancelled cheques.
- Supporting documents filed in calendar order or numerical order.
How long to keep them
Records have to be kept for six years from the end of the last tax year they relate to, unless you have the CRA’s permission to destroy them earlier. Records kept electronically have to stay readable in electronic form, even when a paper copy exists.
A check you can run every month
Compare the sales you recorded with the bank deposits that followed. Where the two do not match, there is a record missing: a cash sale that went to something other than the deposit, a refund, or a sale that was never written down. Finding it that month is easier than finding it at year end. Monthly bookkeeping includes this reconciliation.
If income is left out
The CRA charges a penalty when a return has a false statement or omission made knowingly or in circumstances amounting to gross negligence. The CRA’s page for corporations puts the penalty at the greater of CAD 100 and 50% of the understated tax. The CRA’s pages for individuals and sole proprietors set out their own penalties. A valid voluntary disclosure can bring relief from penalties and part of the interest, and the tax owing is still payable, which is why the Voluntary Disclosures Program guide matters if past sales were not reported.
What records do I need for cash sales?
A daily record of income with the date, amount and source of each sale, supported by original documents such as sales invoices, cash register tapes, receipts and bank deposit slips.
How long do I keep them?
Six years from the end of the last tax year they relate to, unless you have the CRA’s permission to destroy them earlier.
Do electronic records count?
Yes. Records kept electronically have to be retained in an electronically readable format for the full period.
What if I find unreported income from earlier years?
The Voluntary Disclosures Program can reduce penalties and part of the interest if the application comes before the CRA contacts you. The guide on the program explains how.
The Voluntary Disclosures Program →
Books behind? Start with the catch-up checklist →
Want this handled for you
This is the work we do for clients every month. Tell us what you sell and where your books stand, and a written plan and a fixed monthly price follow within one business day.
info@orbisaccounting.ca