What closing a month means
Closing a month is the point at which you stop adding to it and start relying on it. Before then, figures are provisional: invoices may be unsent, receipts unentered and bank items unmatched. After the close, the month’s reports describe a position that was checked against evidence.
The CRA requires records that support your income and expense claims, and generally expects you to keep a daily record. A monthly close is a practical way to check that this record is complete, rather than discovering gaps when a return is due.
A typical sequence
Common steps are entering outstanding sales and supplier bills, reconciling bank, credit card and payment-processor accounts, reviewing unpaid receivables and payables, recording any adjustments, and scanning the reports for figures that look wrong. Payroll and sales tax balances are often checked at the same time.
Depending on the business, there may also be accruals, prepayments or inventory to review. Our bookkeeping month-end close guide turns these into a working checklist; this page explains the idea behind it.
An illustrative example
Imagine, with round numbers, that a business enters its month-end review and finds a $1,200 deposit with no matching invoice, and a $400 card charge with no receipt. Without a close, both would sit in the books as guesses. With one, the owner is asked what the deposit was for and to find the receipt, and the question is settled while memory is fresh.
If a receipt cannot be found, the CRA’s record-keeping guidance says to write down the seller, the amount, the date and the details of the transaction. A note like that is better than nothing, though it is weaker than the original document.
Common mistakes and what to discuss
The usual problems are closing without reconciling, leaving old unexplained items in a catch-all account, and changing a closed month without leaving a trace of what changed. Records are generally kept for six years from the end of the last tax year they relate to, so an unexplained entry can stay with the business for a long time.
Agree with your accountant or bookkeeper on a close date, who supplies missing documents, which reports you receive and how late corrections are handled. Ask which month-ends matter most, since the fiscal year-end usually needs the most attention.
Sources & editorial notes
Sources checked October 24, 2026. The examples are illustrative and provide general information. Discuss how the guidance applies to your circumstances with your accountant.
- Business recordsCanada Revenue Agency
- Where and how long to keep recordsCanada Revenue Agency
Rules and guidance can change. Use the current official source and confirm the treatment for your facts. To flag an error, contact Sora.