Your year end bookkeeping checklist for Canada.

A year end bookkeeping checklist for Canada has one job: get your books into a state where your accountant can prepare the tax return without guessing. Everything your accountant doesn't have to fix is time you don't pay for, and every gap they do find is a question that delays your return.

This guide covers the full year-end process for Canadian small businesses, both sole proprietors filing a T2125 with their personal return and corporations filing a T2. It includes a worked example of the most common year-end adjustments, the CRA deadlines in order, and the QuickBooks Online steps. If your months have been closed properly all year, most of this will be quick. If they haven't, start with our month end close checklist.

1The year end bookkeeping checklist, explained

Reconcile everything to December 31 (or your year end)

Every bank account, credit card, loan, line of credit and payment processor should match its statement on the last day of the year. Loans matter more than people think: the statement shows the principal still owing, and your interest expense for the year depends on getting the split right.

Count inventory

If you sell products, count what's on hand on the last day of the year and value it at cost. Your cost of goods sold for the year depends on it, and so does your profit. Our inventory and cost of goods sold guide explains the maths.

Review receivables

Go through every unpaid invoice. Anything already paid but not matched gets fixed. Anything you genuinely can't collect gets written off as a bad debt, with the paper trail showing you tried.

Review payables and accruals

Are there bills for work done in December that arrive in January? They belong in this year. So do December wages paid in January.

List capital purchases

Equipment, vehicles, computers and furniture are not expensed in one go. Give your accountant a list with dates, costs and invoices so they can calculate capital cost allowance. CCA uses classes and the half-year rule, and the rules for some classes have been changing, so check the current CCA rules rather than assuming last year's rates.

Sort out personal and owner items

For a sole proprietor, personal spending from the business account goes to owner's drawings. For a corporation, it generally goes to the shareholder loan account. If you owe your corporation money at year end, it generally needs to be repaid within one year after the corporation's year end, or it can be added to your personal income. That's a rule worth talking through with your accountant before year end, not after.

Check GST

Your GST payable account should agree with your filed returns plus the current period. If you file annually, your return is due after year end; if you file quarterly or monthly, make sure the returns you filed during the year match the books.

Sole proprietor or corporation: what's different

The bookkeeping steps are almost identical, but the paperwork isn't. A sole proprietor's business results go on the T2125 form inside their personal T1 return, almost always on a December 31 year end, and money taken out of the business is simply drawings, not an expense. A corporation files its own T2 return on whatever fiscal year end it chose, pays you through salary or dividends (each with its own slips), and keeps a running shareholder loan account for everything in between. If you're weighing a switch from one to the other, our guide to whether to incorporate in Alberta covers the trade-offs.

2Worked example: three common year-end adjustments

Say you run a small Edmonton retail and online shop as a corporation with a December 31 year end. While working through the checklist, you find:

• Inventory. Your books show $14,600 of inventory, but the December 31 count, valued at cost, comes to $13,250. The $1,350 difference is shrinkage, damage and miscounts during the year, and it belongs in cost of goods sold.
• Bad debt. A wholesale customer owes you $800 from June, has stopped answering, and you've decided it's uncollectible.
• Personal spending. $640 of charges coded to office expenses were actually personal household items.

Net effect on profit: down $1,350 and $800 for the first two, up $640 for the third, so profit falls by $1,510. The $640 debit to the shareholder loan means you now owe the company $640 more, which is exactly the kind of balance your accountant will want to see cleared in time.

A note on the bad debt: if the original invoice included GST, there's a separate GST adjustment that may let you recover the GST you remitted on it. Our guide to bad debt write-offs in Canada covers it.

3Year-end deadlines for a December 31 year end

Here are the key dates for a business with a December 31, 2026 year end. Tap each once it's handled.

Tap a date once it's handled.

Alberta runs its own corporate income tax, so your accountant also deals with the Alberta side for corporations. If any of these dates look unfamiliar for your business, confirm them with CRA or your accountant; your year end and filing frequency can change them. Our T4 vs T4A vs T5018 guide explains which slips you need.

4Year end in QuickBooks Online

• Reconcile every account to December 31 using the Reconcile tool (gear icon, then Reconcile).
• Post adjustments with + New, then Journal entry, dated December 31, with clear memos.
• Run the Trial Balance report for the year and check every balance makes sense. Our trial balance guide shows what to look for.
• Don't create a "closing entry". QuickBooks Online moves the year's profit into retained earnings automatically on the first day of the new year. You'll see it on the balance sheet.
• Lock the year under Settings, Account and settings, Advanced, Close the books. Give your accountant their own user access instead of exporting spreadsheets.

5Common year-end bookkeeping mistakes

• Expensing big purchases. A $3,000 laptop is a capital asset, not an office expense.
• Forgetting December's bills. Work done in December but billed in January still belongs in this year.
• A shareholder loan nobody looked at. It quietly grows all year and becomes a tax problem.
• Loan payments booked entirely as expense. Only the interest is an expense; the principal reduces the loan.
• Missing slips. Collecting contractor names, addresses and SINs or business numbers in February is much harder than in December.

Your year-end checklist

Store the year-end trial balance, your adjusting entries and every reconciliation report with your records for six years. If this year got away from you, our catch-up bookkeeping rebuilds it from statements. Plum works with partner CPAs on year-end for businesses across Edmonton, St. Albert, Sherwood Park and Leduc; book a quick call and we'll tell you what your year end needs.

6Questions people ask

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This article is general information for Alberta businesses and isn't tax or legal advice. Rules and thresholds change, so confirm your situation with your accountant or CRA.