The short answer: the chart of accounts is the list of categories every transaction in your books is sorted into. A good one is short, lines up with how CRA wants your financial statements reported, and keeps the things that trip up Canadian corporations separate: GST/HST, payroll deductions, and money moving between you and the company.
What is a chart of accounts?
It’s the backbone of your bookkeeping. Every account has a name, a type and, optionally, a number, and belongs to one of five groups:
- Assets: what the business owns, like bank accounts, receivables and equipment.
- Liabilities: what it owes, like supplier bills, loans and taxes owing.
- Equity: the owners’ stake, like share capital and retained earnings.
- Revenue: what the business earns.
- Expenses: what it costs to earn it.
The first three build your balance sheet and the last two your income statement. Our guide to financial statements explains both. QuickBooks Online and Xero create a default chart when you set up the company, which is a reasonable starting point but rarely right as is.
Which accounts does a Canadian corporation need?
- One account for every real bank account and credit card, so each can be reconciled to its statement.
- GST/HST payable, managed by your software’s sales tax settings. GST/HST should never be recorded as part of sales or expenses. Where a separate provincial sales tax applies, as in Manitoba, track it separately.
- Payroll liabilities for CPP, EI and income tax withheld and owing to CRA.
- Corporate income tax payable.
- Loans and lines of credit, one account for each.
- Shareholder loan (often called “due to/from shareholder”) for money moving between you and the corporation.
- Share capital, retained earnings and dividends in equity.
- Revenue by service line, if you want to see which work actually makes money.
- Expense accounts that match tax treatment, such as meals and entertainment kept separate (only half of most of it is deductible), subcontractors, vehicle costs and professional fees.
Why the shareholder loan account matters
When you take money out of the corporation personally, or pay business costs from your own pocket, it belongs in the shareholder loan account, not in expenses or wages. It matters because if you owe the corporation money, the balance generally has to be repaid within one year after the end of the corporation’s tax year in which the loan was made. Otherwise, it’s added to your personal income. A clean shareholder loan account is often the biggest single job in a catch-up.
Map every account to a GIFI code
Your T2 corporate return reports your financial statements using CRA’s General Index of Financial Information (GIFI), where every line has a code. When each account in your chart maps cleanly to one GIFI code, the year-end and T2 are faster to prepare and easier to check.
Mistakes that make a clean-up necessary
- dozens of near-duplicate accounts (“Office”, “Office supplies”, “Office expense”)
- thousands of dollars sitting in “Uncategorized” or “Ask my accountant”
- GST/HST recorded inside sales or expenses
- owner withdrawals recorded as wages without payroll, or as business expenses
- full loan payments expensed, when only the interest is an expense
- equipment expensed instead of recorded as an asset
- personal and business transactions mixed in the same accounts
How to change your chart of accounts safely
- make structural changes at the start of a fiscal year, not halfway through
- merge or deactivate old accounts rather than deleting accounts that have history
- keep names consistent, so year-over-year comparisons still work
- write down what each account is for, especially if more than one person does the books
If the books are already tangled, fixing the chart of accounts is usually part of a larger clean-up. Our monthly bookkeeping keeps it tidy after that.
Sources: CRA, RC4088 General Index of Financial Information (GIFI); Income Tax Act, section 15. First published August 2023 and fully revised in September 2026. General information, not advice for your specific situation.
