Twelve signs your books are wrong
Books that are wrong don't look wrong. They balance, they produce a profit figure, and the software says everything is fine. The tells are in specific accounts, and once you know which ones to open you can check most of this yourself in twenty minutes.
Open five accounts and you'll know: GST/HST payable, the payroll liability and clearing accounts, the shareholder loan account, the suspense or "Ask My Accountant" account, and the bank reconciliation report. A GST/HST payable that never clears after a filing, payroll accounts that don't tie to your PD7A statements, a shareholder loan nobody tracked, a suspense account with a balance in it, or unreconciled items older than 90 days — any one of those means the numbers you're making decisions from aren't the numbers.
How to use this list
These aren't CRA audit red flags. CRA publishes no such list, and anyone who says otherwise is guessing — we cover that on our CRA audit triggers page. These are the twelve things someone cleaning up Canadian books opens first, because they're where errors accumulate without ever throwing an error. Count how many apply: one is a Tuesday afternoon, three or more means a cleanup rather than a correction.
The tax accounts
1. Your GST/HST payable account never clears to zero
Run the account for the last two years. After each return you filed and paid, the balance should return to zero — or to a small, known amount you can name, like a period not yet remitted.
If instead there's a balance growing every quarter, one of two things happened: the filing entries were never posted, so the account has been accumulating tax that was in fact paid, or something was filed that the books never agreed with. Either way your returns and your general ledger are telling different stories and CRA only has one of them. This is the most common finding in Canadian small business books, and the fastest to check.
2. ITCs claimed on receipts that don't support them
Input tax credit documentation requirements scale with the size of the purchase, and they are not what most published guidance says they are.
| Total sale | Required information |
|---|---|
| Under $100 | Supplier's business or trading name; invoice date (or the date GST/HST was paid or became payable); total amount paid or payable |
| $100 – $499.99 | The above, plus the supplier's GST/HST registration number and an indication of the total GST/HST charged — or which items are taxable at which rate |
| $500 or more | The above, plus the buyer's name or trading name, a brief description of the property or services, and the terms of payment |
These thresholds were raised from $30 and $150 effective April 20, 2021. Most blog posts, most templates, and at least one CRA memorandum not updated since 2012 still show the old figures. A bookkeeper still working to the $30 and $150 tiers is working from stale guidance — which matters less for the tiers themselves than for what it says about their reference material.
The failure that costs money is a missing supplier GST/HST registration number on purchases over $100. Without it the credit isn't supported, and since you generally have four years to claim an ITC, a credit thrown out on review can't always be fixed later.
3. Payroll clearing accounts that don't reconcile to the PD7A
Your PD7A remittance statements are CRA's own record of what it received and when; your payroll liability and clearing accounts are your record of what you owed. They should agree month by month, and against the T4 Summary.
When they don't, it's almost always one of three things: a remittance made and never recorded, a payroll run recorded and never remitted, or the employer portions of CPP, CPP2 and EI posting somewhere that doesn't flow through the liability account. The second is the expensive one — penalties start at 3% at one to three days late and reach 10% past seven days, with interest on top.
4. Sales tax charged at the wrong provincial rate
CRA's wording is that "the rate of tax to charge depends on the place of supply. This is where you make your sale, lease, or other supply." So it follows the customer, not where your business sits. A business in one province selling to customers in another is the classic case, and so is anything delivered digitally. The tell in the books is a tax collected account with one rate applied to everything, or an invoice template that never changed even though the customer list did. Take the applicable rates from CRA's page on charging and collecting the GST/HST rather than from a template built years ago.
Sources: CRA how to complete and file an input tax credit claim (updated 2024-11-19); Excise and GST/HST News No. 118 (2025-01-14); charge and collect the GST/HST (2026-04-08); penalty for late remitting or failure to remit (2026-06-11).
The owner accounts
5. A shareholder loan account that drifted all year
In a corporation, every dollar moving between you and the company lands here: the company card used at the grocery store, the transfer to cover payroll, the reimbursement never claimed. Left untracked it becomes one unexplained balance somebody has to reconstruct after the fact. The tell is a handful of large round entries and no monthly activity — or worse, a single journal entry dated the last day of the fiscal year for the whole amount. That's not a record, that's a plug.
What the balance means is a tax question, not a bookkeeping one. Whether an amount must be repaid within a particular window, whether it gets included in your income, whether it should have been salary or a dividend — those are your accountant's decisions, with real consequences attached. What a bookkeeper owes you is a complete, dated, explained record of every movement so that call gets made with facts in front of it. Be wary of anyone advising on tax treatment from the bookkeeping seat.
6. Owner's personal spending sitting in business expense accounts
Look at twelve months of whatever account catches miscellaneous spending: groceries coded to office supplies, a family dinner in meals, a personal phone line in utilities. In a sole proprietorship this overstates expenses and understates income; in a corporation it does that and also lands in the shareholder loan account or becomes a taxable benefit. Either way, in a business audit CRA can ask for the owner's personal records — bank statements, credit card statements, mortgage documents — and for records of related persons and entities. A blurred line between you and the business stops being private once someone is looking.
The mechanics
7. Unreconciled bank items older than 90 days
Open the bank reconciliation report and look at outstanding items. A cheque uncleared for three months is lost, stale, or was never issued. A deposit in transit for ninety days did not happen. Old uncleared items are usually duplicates in disguise — the payment went out, got recorded twice, and one copy sits in the reconciliation forever making the balance look right while the expense is counted twice.
8. "Ask My Accountant" or a suspense account with a balance
Every accounting package has a version of this: an account where transactions go when nobody knows what they are. It exists so work can continue, and it's supposed to be empty by month-end. A balance in it means transactions were never identified — each one is revenue that isn't in your revenue, an expense that isn't in your expenses, or something personal that shouldn't be in the books at all. Whatever the balance is, that's the size of the part of your business nobody has explained.
9. Duplicate supplier bills
Sort accounts payable by supplier and amount and look for pairs. Duplicates come from a bill entered manually and again from an emailed PDF, or from a bank feed transaction categorised as an expense when the bill was already recorded. The consequence runs both ways: you may pay a supplier twice, and you may claim the same input tax credit twice. The first you can usually recover if you catch it within a few months; the second is a GST/HST error that has to be corrected.
10. Opening balances that never matched the prior year-end
Compare this year's opening balance sheet to the closing balance sheet on last year's filed statements or the accountant's adjusting entries. They should be identical. They frequently aren't, because the year-end adjustments were never posted back into the bookkeeping file — and when that happens every comparative figure for the following year is wrong, permanently, until someone reconciles back to the last agreed year-end. It's why the first question in any catch-up job is which year was last properly filed, the same starting point our page on being behind on bookkeeping works from.
The tax adjustments
11. Meals booked at 100% instead of 50%
Meals and entertainment are deductible at 50% of the lesser of the amount incurred or an amount reasonable in the circumstances. If meals sit in a general expense account at full value with no adjustment, the deduction is overstated. There are genuine 100% exceptions — food regularly supplied for compensation, costs billed to and itemized for a client, up to six employee events a year where all employees at a location are invited, registered-charity fundraisers — and long-haul truck drivers are at 80%. Those need their own accounts so the exception is visible and provable rather than assumed.
Conventions carry a rule that is almost always reported backwards: where a convention fee includes food, beverages or entertainment that isn't separately itemized, you must subtract $50 from the fee for each day the organizer provides them, and that $50 is then treated as a meal expense subject to the 50% limit. It is a mandatory carve-out out of the fee, not a per diem you get to claim.
12. A vehicle expense claim with no logbook
A business-use percentage with nothing behind it is the most common unsupported claim in a small business file. CRA wants a logbook recording, for each trip, the date, destination, purpose and number of kilometres, plus odometer readings at the start and end of the fiscal period and on any purchase, sale or trade. The workable version is a full logbook for one complete twelve-month base year, then a three-month sample each year afterwards to extrapolate — as long as usage stays within 10% of the base year result and the base year remains representative. Keep the base-year logbook six years from the end of the last tax year it's used for.
Sources: CRA line 8523, meals and entertainment (updated 2026-08-31); convention expenses (2025-06-05); motor vehicle records (2026-08-31); business audits (2025-04-17).
If you recognised three or more
Don't start correcting entries. Errors in these accounts are usually connected — a GST/HST payable that won't clear and a suspense account with a balance are often the same problem seen twice — and fixing them one at a time in the wrong order creates new ones.
The order that works: find the last year properly filed and agree your opening balances to it, reconcile every bank and card account forward from there, rebuild GST/HST and payroll against the returns and PD7As actually filed, and clean up coding last. Our monthly bookkeeping checklist keeps the file from drifting again, and the year-end package is what it should all produce.
Find out which of the twelve apply to you
We'll open the five accounts above and tell you what we find, in plain language — so you know whether you're looking at an afternoon's correction or a cleanup, before you commit to either.
Get your books looked atQuestions people actually ask
How do I know if my bookkeeping is wrong?
Open five accounts. Your GST/HST payable account should return to zero after each return you file and pay. Your payroll liability and clearing accounts should agree to your PD7A remittance statements. Your shareholder loan account, if you're incorporated, should show dated monthly activity rather than one year-end journal entry. Your suspense or "Ask My Accountant" account should be empty. And your bank reconciliation should have no outstanding items older than about ninety days. Any of those failing means the numbers you're running the business from aren't reliable.
Why doesn't my GST/HST payable account ever go to zero?
Usually because the filing entries were never posted, so the account keeps accumulating tax you actually collected and actually remitted. The other common cause is that a return was filed from figures the general ledger never agreed with, which leaves a permanent difference. Either way your books and your filed returns are telling different stories, and CRA has only one of them. Running that account for the last two years and matching each clearing to a filed return is the fastest diagnostic in Canadian bookkeeping.
What receipts do I need to claim an input tax credit?
It depends on the size of the purchase. Under $100 you need the supplier's business or trading name, the invoice date or the date the GST/HST was paid or payable, and the total amount. From $100 to $499.99 you also need the supplier's GST/HST registration number and an indication of the total GST/HST charged. At $500 or more you additionally need your own name or trading name, a brief description of what was bought, and the terms of payment. These thresholds were raised from $30 and $150 in April 2021, and a lot of published guidance still repeats the old numbers.
My bookkeeper says the ITC threshold is $30. Are they wrong?
Yes, as of April 20, 2021. The thresholds are now $100 and $500. It's an easy mistake to inherit, because CRA's own GST/HST Memorandum 8-4 still shows the old $30 and $150 figures and has not been updated since 2012, so anyone working from it is working from stale material. The current figures are on CRA's live input tax credit page. The reason it matters is less about the specific number and more about what it says about the reference material being used.
What's a shareholder loan account and why does mine matter?
It's the account in a corporation's books that records every movement of money between the company and its shareholder — you. Personal spending on the company card, a transfer in to cover payroll, an unreimbursed expense: all of it lands there. It matters because the balance has real tax consequences, and those are decisions for your accountant to make, not your bookkeeper. What your bookkeeper owes you is a complete, dated record of every movement with an explanation attached, so your accountant is deciding from facts rather than from a single unexplained year-end figure.
Can I fix my own books once I've found the errors?
You can, but not by correcting entries as you find them. The errors in these accounts are usually connected, and fixing them out of order creates new ones — repost a GST/HST entry before your opening balances agree to the last filed year and you've moved the problem rather than solved it. The order that works is: agree your opening balances to the last properly filed year-end, reconcile every bank and credit card account forward from there, rebuild GST/HST and payroll against the returns and PD7A statements actually filed, then fix coding last.