Canadian Accounting Handbook

Double-entry principles, debits and credits, journal entries and the ledger.

• Normal BalancesThe normal balance of an account is the side (debit or credit) on which that account ordinarily carries its balance.
• Journal EntriesA journal entry is the original, dated record of a business transaction, showing the accounts affected and the equal debits and credits that document it.
• General LedgerThe general ledger is the complete collection of accounts used by a corporation. Every journal entry is posted to it and every financial statement is derived from it.
• Trial BalanceA trial balance lists every general ledger account with its balance, grouped into debits and credits, to prove that total debits equal total credits at a point in time.
• Cash vs. Accrual BasisCash basis records transactions when money moves. Accrual basis records them when they are earned or incurred. ASPE and IFRS financial statements use accrual accounting; tax has limited cash-method exceptions.
• Matching PrincipleExpenses are recognized in the same period as the revenue they helped generate, not in the period they are paid.
• Conservatism PrinciplePrudence means caution in uncertain estimates, without deliberate bias or hidden reserves.
• Going Concern AssumptionFinancial statements are prepared on the assumption that the corporation will continue to operate for the foreseeable future, usually at least twelve months from the reporting date.

Balance sheet, income statement, cash flows, retained earnings.

• Balance SheetThe Balance Sheet (Statement of Financial Position) reports a corporation's assets, liabilities, and equity at a single point in time.
• Income StatementThe Income Statement (Statement of Operations) reports revenue, expenses, and net income for a reporting period.
• Cash Flow StatementThe Cash Flow Statement reconciles the change in cash across operating, investing, and financing activities over the period.
• Statement of Retained EarningsThe Statement of Retained Earnings reconciles opening and closing retained earnings, showing net income and dividends declared during the period.
• Notice to Reader (Compilation Engagement)Under CSRS 4200, the old Notice to Reader is replaced by the Compilation Engagement Report, with a mandatory description of the basis of accounting.

ASPE, IFRS, and when to apply each framework.

• ASPE OverviewASPE (Accounting Standards for Private Enterprises) is Part II of the CPA Canada Handbook and is the default Canadian GAAP framework for private companies.
• IFRS OverviewIFRS, adopted in Canada as Part I of the CPA Canada Handbook, generally applies to publicly accountable enterprises, subject to regulatory exceptions, and is optional for private companies.
• ASPE 1506: Changes in Accounting PolicyASPE 1506 governs voluntary and required changes in accounting policy, which are generally applied retrospectively with restated comparatives.
• ASPE 1506: Changes in Accounting EstimatesA change in accounting estimate is applied prospectively under ASPE 1506 and does not require restatement of prior-period comparatives.
• ASPE 1506: Correcting Prior-Period ErrorsA material prior-period error is generally corrected under ASPE 1506 by retrospective restatement of the affected comparatives and opening retained earnings.

Account structures and CRA's General Index of Financial Information.

• GIFI Codes by Range, With the Most Used CodesThe General Index of Financial Information (GIFI) is CRA's four-digit coding system for the balance sheet and income statement a corporation files with its T2.
• GIFI-Short (T1178)T1178 is a paper GIFI package with eligibility conditions; the under-$1-million tests do not exempt a corporation from mandatory electronic filing.
• GIFI Asset AccountsGIFI items 1000 to 2599 cover every asset a corporation reports on Schedule 100, from cash and receivables through capital assets and intangibles.
• GIFI Liability AccountsGIFI items 2600 to 3499 cover every current and long-term liability reported on Schedule 100, including payables, taxes payable and shareholder loans.
• GIFI Equity AccountsGIFI items 3500 to 3640 report shareholder equity and items 3660 to 3849 report the retained earnings continuity filed with Schedule 100.
• GIFI Income and Expense Codes, With ExamplesGIFI revenue items run 8000 to 8299 and expense items run 8300 to 9368 on Schedule 125, from salaries and rent through professional fees and interest.

T2 return, CCPC rules, SBD, dividend pools, and key schedules.

• T2 Corporate Return OverviewMost Canadian-resident corporations must file a T2 within six months of year-end; the usual balance deadline is two months, with a three-month deadline for qualifying CCPCs.
• CCPC StatusA Canadian-Controlled Private Corporation is a private corporation resident in Canada that is not controlled by non-residents or public corporations, and CCPC status unlocks the small business deduction, refundable tax mechanics, and the capital gains exemption.
• Small Business DeductionThe Small Business Deduction reduces federal corporate tax on qualifying Canadian active business income of an eligible CCPC, subject to its adjusted business limit, dropping the federal rate from 15% to 9%.
• Associated Corporations RuleAssociated corporations under ITA s.256 must share a single $500,000 Small Business Deduction limit and combine their passive income and taxable capital for the SBD grind tests.
• General Rate Income Pool (GRIP)GRIP is a notional pool tracked by CCPCs that represents income taxed at the general corporate rate and supports the payment of eligible dividends to shareholders.
• Low Rate Income Pool (LRIP)LRIP is the notional pool tracked by non-CCPCs that restricts their ability to pay eligible dividends, forcing any LRIP balance to be distributed as non-eligible dividends first.
• Refundable Dividend Tax On Hand (RDTOH)RDTOH is a refundable tax pool tracked by private corporations that returns a portion of federal tax on investment income when taxable dividends are paid to shareholders, split since 2019 into ERDTOH and NERDTOH.
• Capital Dividend Account (CDA)The Capital Dividend Account is a notional tax pool of a private corporation that allows certain amounts, primarily the non-taxable half of capital gains and life insurance proceeds, to be paid to shareholders as tax-free capital dividends.
• Schedule 1. Net Income for TaxSchedule 1 (T2SCH1) reconciles a corporation's accounting net income to its net income for tax purposes by adding back non-deductible items and subtracting tax-only deductions.
• Schedule 3. Dividends Received and Part IV TaxSchedule 3 (T2SCH3) reports dividends received and paid by a corporation and computes Part IV refundable tax on portfolio and connected-company dividends.
• Schedule 4. Corporation Loss ContinuitySchedule 4 (T2SCH4) tracks the continuity and application of non-capital losses, net capital losses, farm losses, restricted farm losses, and limited partnership losses across tax years.
• Schedule 5. Provincial Tax AllocationSchedule 5 (T2SCH5) allocates taxable income among provinces and territories where the corporation has a permanent establishment, determining provincial and territorial tax liability.
• Schedule 6. Capital Gains and LossesSchedule 6 (T2SCH6) summarizes dispositions of capital property during the tax year and computes taxable capital gains, allowable capital losses, and the capital dividend account credit.
• Schedule 7. Aggregate Investment IncomeSchedule 7 (T2SCH7) calculates aggregate investment income, adjusted aggregate investment income (AAII), and income eligible for the small business deduction, driving the $50K–$150K passive income grind.
• Schedule 8. Capital Cost AllowanceSchedule 8 (T2SCH8) tracks capital cost allowance by CCA class, applying the half-year rule, AIIP, and immediate expensing to compute the maximum deduction.
• T2 Schedule 50 (T2SCH50): Shareholder InformationSchedule 50 (T2SCH50) reports every shareholder who owns 10% or more of common and/or preferred shares, with name, identifier and ownership percentages.
• T2 Schedule 100 (T2SCH100): Balance Sheet GIFI CodesSchedule 100 (T2SCH100) is the corporation's balance sheet on the T2, reported with CRA GIFI items in the 1000 to 3849 range.
• T2 Schedule 125 (T2SCH125): Income Statement GIFI CodesSchedule 125 (T2SCH125) is the corporation's income statement on the T2, reported with CRA GIFI items and ending at the book net income shown at item 9999.

T1 return, tax brackets, the basic personal amount, dividend tax credits.

• T1 Personal Return OverviewThe T1 reports personal income, deductions and credits. Filing requirements depend on your situation, and Quebec has a separate provincial return.
• Federal Tax BracketsCanada's federal personal tax rates for 2026 are marginal: each bracket only taxes the income that falls inside it.
• Basic Personal AmountEvery Canadian resident can earn a base amount of income tax-free through a non-refundable federal credit that phases down for high-income filers.
• Eligible vs. Non-Eligible DividendsCanadian dividends are grossed up and taxed with an offsetting dividend tax credit; eligible dividends come from high-rate corporate income and receive a larger credit.

Registration, ITCs, filing, place of supply, special regimes.

• GST/HST OverviewCanada's federal value-added tax, applied at 5% GST alone in most western and northern provinces and at a blended HST rate of 13% to 15% in five harmonized provinces.
• GST/HST RegistrationHow to open a GST/HST account with CRA, what triggers a registration requirement, and how the Business Number is structured.
• Small Supplier $30K ThresholdThe $30,000 in four consecutive calendar quarters rule under ETA s.148 that determines when a person stops being a small supplier and must register for GST/HST.
• Voluntary GST RegistrationSmall suppliers can register voluntarily under ETA s.240(3) to claim ITCs, but must then charge tax on every taxable sale and stay registered for at least one year.
• Taxable, Zero-Rated, and Exempt SuppliesEvery supply in Canada is either taxable at the full rate, zero-rated (taxable at 0% with ITCs), or exempt (no tax and no ITCs). The classification drives both invoicing and recovery.
• Input Tax Credits (ITCs)The mechanism under ETA s.169 that lets a GST/HST registrant recover the tax paid on inputs used in its commercial activity, so only the final consumer bears the tax.
• GST/HST Quick MethodA simplified regime under ETA s.227 where the registrant remits a fixed percentage of GST-included revenue instead of tracking ITCs, elected on Form GST74.
• Simplified ITC MethodAn optional calculation that lets eligible small registrants compute ITCs by multiplying total tax-included purchases by 5/105, 13/113, 14/114, or 15/115, without separating tax on every receipt.
• GST/HST Filing FrequencyAssigned annual, quarterly, or monthly reporting periods under ETA s.245 based on threshold amounts of $1.5M and $6M, plus quarterly installment obligations when net tax is $3,000 or more.
• Place of Supply RulesThe rules in ETA s.142 and Schedule IX that determine in which province a supply is deemed made, which in turn selects the GST or HST rate to charge.
• GST on Real PropertyReal-property GST/HST depends on the transaction, builder status, purchaser and use. New-home rebates, commercial purchaser self-assessment and residential exemptions have separate conditions.

CPP, EI, source deductions, T4s, and remittance rules.

• Payroll Account (RP)The RP program account is the CRA identifier a corporation must open before it can remit source deductions for employees.
• CPP ContributionsCanada Pension Plan contributions are mandatory deductions split equally between employee and employer, with an enhanced CPP2 tier above the first earnings ceiling.
• EI PremiumsEmployment Insurance premiums are deducted from insurable earnings up to an annual maximum, with the employer paying 1.4 times the employee rate.
• Income Tax WithholdingEmployers must withhold federal and provincial income tax from each pay cheque using CRA's T4032 tables or T4127 formulas, based on the employee's TD1 claims.
• TD1 FormTD1 forms support payroll personal-credit claims. New employment, concurrent jobs and changes in expected annual credits determine when forms need updating.
• PD7A Remittance VoucherThe PD7A is the statement of account CRA issues to report payroll source deductions already remitted and the balance due for the current period.
• T4 SlipsT4 slips report annual employment income, benefits and deductions. Filing, employee distribution, penalties and amendments each have their own rules.
• Record of Employment (ROE)An ROE records insurable employment and interruptions of earnings. Its deadline and reporting windows depend on the filing format and pay frequency.
• Taxable Employee BenefitsEmployer benefits can create taxable employment income. Valuation, T4 reporting, CPP and EI treatment depend on the benefit and how it is provided.

CCA classes, half-year rule, AIIP, immediate expensing, recapture.

• Capital Cost Allowance OverviewCapital Cost Allowance (CCA) is the tax version of depreciation: a declining-balance (or occasionally straight-line) deduction that spreads the cost of a capital asset across multiple tax years.
• Half-Year RuleWhen qualifying net additions become available for use, the ordinary rule in Regulation 1100(2) reduces the CCA base for net additions by 50% so the first-year deduction is halved.
• Accelerated Investment Incentive Property (AIIP)AIIP replaced the half-year rule with a 1.5× first-year CCA for most property acquired after November 20, 2018. After a 2024 to 2027 step-down, property acquired after 2024 gets 1.5× again until 2029 as reaccelerated investment incentive property.
• Immediate Expensing ($1.5M)Immediate expensing let a CCPC write off up to $1.5M per year of eligible depreciable property in the year it became available for use, for property available for use before 2024 (before 2025 for individuals and partnerships of individuals). This original measure does not cover 2026 purchases; a separate September 2026 proposal is discussed in AIIP.
• CCA Class 8. Furniture and EquipmentClass 8 is a 20% declining-balance pool for furniture, fixtures, general equipment, and photocopiers that do not belong in another specific class.
• CCA Class 10. Passenger VehiclesClass 10 is the 30% declining-balance pool for motor vehicles, including most business passenger vehicles costing no more than the ceiling ($39,000 before tax for 2026 acquisitions).
• CCA Class 12. Small Tools and SoftwareClass 12 is a 100% CCA class for non-systems software, small tools under $500, medical and dental instruments, utensils, and similar short-lived items.
• CCA Class 50. Computer HardwareClass 50 is the 55% declining-balance pool for general-purpose electronic data processing equipment and systems software acquired after March 18, 2007.
• Terminal LossWhen the last asset in a CCA class is disposed of and a positive UCC remains, Income Tax Act s.20(16) allows the remaining balance to be deducted as a terminal loss.

Deductibility rules, home office, vehicle, meals, and more.

• Business Expense Principle (ITA 18)An outlay is deductible only if it is incurred for the purpose of gaining or producing income from a business or property and is not a personal or capital expense.
• Meals and Entertainment (50% Rule)Business meals and entertainment are generally limited to a 50% deduction under ITA s.67.1, with documented business purpose and a short list of 100% exceptions.
• Home Office ExpenseHome-office deductions differ for sole proprietors, employees and corporations. Eligibility, allocation, reimbursements and principal-residence treatment require separate checks.
• Vehicle ExpenseMotor vehicle costs are deductible on the business-use share established by a logbook, with passenger vehicle ceilings on capital cost, interest, and lease payments.
• Travel ExpenseReasonable business travel costs can be deductible. Personal travel is excluded, meals generally have a 50% limit, and qualifying conventions have separate conditions.
• Advertising and PromotionAdvertising needs a business purpose and reasonable cost. Newspaper, periodical and foreign-broadcast rules can restrict deductions; capital assets require separate treatment.
• Professional FeesLegal, accounting, and consulting fees are deductible when incurred for income-earning purposes, but fees tied to acquisitions, financings, or reorganizations are often capital.
• Insurance ExpenseBusiness insurance premiums (liability, property, E&O) are deductible, but life insurance premiums on a key person are generally non-deductible even when the corporation is the beneficiary.
• Club Memberships and DuesITA s.18(1)(l) denies deductions for membership fees at any club whose main purpose is dining, recreation, or sporting activities, even when the use is entirely business.
• Business GiftsClient gifts need a business purpose, and food or beverage gifts usually face the meal limit. Employee gift exclusions have specific eligibility and recordkeeping conditions.
• Rent ExpenseRent paid for business premises is deductible under s.18(1)(a), with matching applied to prepaid rent and a reasonableness test applied to related-party rent.
• Repairs vs. Capital ExpendituresRepair or capital treatment depends on restoration, improvement and the property acquired. Price, account labels and market-value changes do not decide the answer alone.
• Leasing Cost LimitsITA s.67.3 caps the monthly deduction for leasing a passenger vehicle through two formulas that reference the prescribed monthly cap and the manufacturer's list price ceiling.

Salary vs. dividends, shareholder benefits, TOSI and income splitting.

• Salary vs. DividendsThe core owner-manager compensation question: pay yourself through payroll with CPP and RRSP room, or through dividends with no withholdings and simpler cash flow.
• Shareholder Benefits (ITA 15(1))When a corporation confers a benefit on a shareholder, the fair market value of the benefit is included in the shareholder's income and is not deductible by the corporation.
• Management FeesFees paid by an operating corporation to a shareholder, related corporation, or family service provider must reflect real services at reasonable rates, with proper invoicing and GST/HST.
• Tax on Split Income (TOSI)TOSI taxes certain types of income paid to family members from a related private corporation at the top marginal rate, unless an exclusion applies.
• Bonus AccrualsAn otherwise deductible bonus unpaid on the 180th day after year-end is denied in the accrual year and becomes deductible in the year paid under ITA s.78(4).

CRA retention rules, electronic records, audit readiness.

• Six-Year Retention RuleCRA requires corporations to keep books, records, and supporting documents for at least six years from the end of the tax year they relate to, with longer holds in several defined situations.
• Electronic RecordsCRA allows books and records to be kept in electronic form if they are readable, auditable, and accessible in Canada. ITA s.230(4.1), ETA s.286(3.1) and GST/HST Memoranda 15-1 and 15-2 set the standards.

Federal vs. provincial, share structure, governance basics.

• Federal vs. Provincial IncorporationFounders can incorporate federally under the CBCA or provincially under a statute such as the BC Business Corporations Act. Each route offers different name protection, residency rules, and filing duties.
• Share ClassesShare classes define voting, dividend, redemption and wind-up rights. Their terms, statutory protections and tax consequences must be assessed together.
• Shareholders' AgreementShareholder agreements can govern control, transfers and exits. Federal unanimous-agreement rules and BC article-based transfers of director powers are different.

BC PST, EHT, WorkSafeBC, corporate and personal tax.

• BC PST OverviewBritish Columbia levies a 7% Provincial Sales Tax (PST) on tangible personal property and specified services, administered separately from the federal 5% GST.
• BC PST RegistrationBC PST registration depends on your location and what you sell. The out-of-province revenue test is not a general exemption for businesses located in BC.
• BC PST Expansion to Professional Services (Paused)BC has paused the Budget 2026 extension of 7% PST to accounting, architectural, engineering, geoscience, non-residential real estate and security services.
• BC Corporate Tax RatesBC's corporate rates are 2% on qualifying small business income and 12% otherwise. Combined federal and BC rates are generally 11% and 27% on ordinary active business income, subject to the available business limit.
• BC Personal Tax BracketsBC uses a seven-bracket progressive personal income tax system with 2026 rates from 5.60% on the first income band up to 20.5% on income over $265,545; Budget 2026 paused bracket indexation for 2027 to 2030.
• BC Employer Health TaxBC's Employer Health Tax (EHT) is a payroll tax on BC remuneration above a $1,000,000 exemption for regular employers, with a graduated notch rate between $1M and $1.5M and a flat 1.95% on payroll above $1.5M.
• WorkSafeBC RegistrationBC incorporated companies, including one-person corporations, must register with WorkSafeBC; active shareholders who perform work are treated as workers under the Workers Compensation Act.
• BC Annual Report (Registry)BC corporations file an annual registry report within two months of their incorporation anniversary. The government filing fee is $43.39; service charges can depend on the filing channel.
• BC Business NumberA BC corporation typically holds four distinct identifiers: the federal Business Number (BN), a BC Incorporation Number, a BC PST number if registered, and a WorkSafeBC account number.
• BC PST Exemptions: Goods, Services and CertificatesWhat is exempt from BC PST: basic groceries, prescription drugs, children's clothing, most services, goods bought for resale, and production machinery.
• BC Holding CompanyA BC holding company holds shares, investments or property. Tax results depend on association, dividend rules and asset use; creating a second corporation does not automatically protect assets or preserve the small-business limit.

Ontario HST, EHT, WSIB, corporate and personal tax.

• Ontario HSTOntario levies a 13% Harmonized Sales Tax (5% federal + 8% provincial) administered by the Canada Revenue Agency under the federal Excise Tax Act.
• Ontario Corporate Tax RatesOntario imposes a 2.2% small business rate (3.2% before July 1, 2026) on the first $500,000 of active business income, an 11.5% general rate, and a 10% manufacturing and processing rate under the Taxation Act, 2007 (Ontario).
• Ontario Innovation Tax CreditThe Ontario Innovation Tax Credit is an 8% refundable credit for qualifying corporations conducting SR&ED in Ontario, subject to an expenditure limit and separate provincial assistance rules.
• Ontario Made Manufacturing Investment Tax CreditThe Ontario Made Manufacturing Investment Tax Credit is a refundable credit for CCPCs of 15% (up to $3 million a year) on qualifying buildings, machinery and equipment (Class 1, and Class 53 or Class 43(a)) used in Ontario manufacturing and processing that become available for use from May 15, 2025 through 2029.
• Ontario Employer Health TaxThe Ontario Employer Health Tax (EHT) is an employer-paid payroll tax ranging from 0.98% to 1.95% of Ontario remuneration above a $1 million exemption for most private employers, levied under the Employer Health Tax Act to fund the province's health system.
• WSIB PremiumsWSIB premium rates vary by industry classification; the 2026 average premium rate is $1.23 per $100 of insurable earnings, down from $1.25 in 2025, and maximum insurable earnings are $121,700 per worker for 2026 ($117,000 for 2025).
• Ontario Annual ReturnOntario corporations must file an annual return with the Ontario Business Registry within six months of the fiscal year-end; since October 2021 this filing is separate from the T2 and is no longer attached as Schedule 546.
• Ontario Business RegistryThe Ontario Business Registry (OBR), launched October 19, 2021, is the online system for incorporation, annual returns, business name registration, and most corporate filings, replacing ServiceOntario for these transactions.
• Ontario Insurance Premium TaxOntario insurance premium tax is 2% for life, accident and sickness, 3.5% for property, and 3% for other insurance. A separate 8% retail sales tax applies to taxable insurance premiums and benefit plans, subject to exemptions.
• Ontario Land Transfer TaxOntario land transfer tax uses graduated rates, with an additional Toronto municipal tax and separate provincial and Toronto speculation taxes for qualifying foreign purchasers.
• Ontario Personal Tax BracketsOntario's 2026 personal income tax brackets run from 5.05% to 13.16%, with the first two thresholds at $53,891 and $107,785. Surtax and the Ontario Health Premium are calculated separately.
• Ontario Basic Personal AmountOntario's 2026 Basic Personal Amount is $12,989. At the 5.05% credit rate, it reduces basic Ontario income tax by up to $655.94 before the remaining provincial tax calculation.
• Ontario SurtaxOntario's 2026 surtax adds 20% of basic provincial tax above $5,818 and another 36% above $7,446. Both layers apply above the second threshold; the Ontario Health Premium is separate.
• Ontario HST Point-of-Sale RebatesOntario rebates the 8% provincial HST component on qualifying books, children’s products, newspapers and prepared food and beverages totalling $4 or less. Zero-rated products follow separate rules.