# Reference — Bookkeeping for Small Businesses

# Contents

#	Account	Type
1000	Cash — Operating	Asset
1100	Accounts Receivable	Asset
1200	Inventory	Asset
1300	Prepaid Expenses	Asset
1500	Equipment	Asset
1510	Accumulated Depreciation — Equipment	Contra-asset
2000	Accounts Payable	Liability
2100	Credit Card Payable	Liability
2200	Sales Tax Payable (GST/HST/state)	Liability
2300	Payroll Liabilities	Liability
2500	Loan Payable	Liability
3000	Owner's Capital / Common Shares	Equity
3100	Owner's Draws / Dividends Declared	Equity
3900	Retained Earnings	Equity
4000	Sales Revenue	Revenue
4900	Refunds and Discounts	Contra-revenue
5000	Cost of Goods Sold	Expense
6000	Rent	Expense
6100	Salaries and Wages	Expense
6200	Payroll Taxes (employer share)	Expense
6300	Software and Subscriptions	Expense
6400	Professional Fees	Expense
6500	Insurance	Expense
6600	Depreciation Expense	Expense
6700	Interest Expense	Expense

Account type	Increase	Decrease	Normal balance
Asset	Debit	Credit	Debit
Expense	Debit	Credit	Debit
Liability	Credit	Debit	Credit
Equity	Credit	Debit	Credit
Revenue	Credit	Debit	Credit

Credit sale with 13% HST (Ontario):

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Dr 1100 Accounts Receivable   1,130
    Cr 4000 Sales Revenue          1,000
    Cr 2200 Sales Tax Payable        130

Customer pays the invoice:

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Dr 1000 Cash                  1,130
    Cr 1100 Accounts Receivable    1,130

Remitting the sales tax:

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Dr 2200 Sales Tax Payable       130
    Cr 1000 Cash                     130

Monthly loan payment $500 ($420 principal, $80 interest):

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Dr 2500 Loan Payable            420
Dr 6700 Interest Expense         80
    Cr 1000 Cash                     500

Monthly depreciation (straight line, $12,000 equipment / 5 years):

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Dr 6600 Depreciation Expense    200
    Cr 1510 Accumulated Depreciation 200

Prepaid annual insurance $1,200, monthly recognition:

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At payment:  Dr 1300 Prepaid Expenses 1,200 / Cr 1000 Cash 1,200
Each month:  Dr 6500 Insurance 100 / Cr 1300 Prepaid Expenses 100

Entity	Money out is recorded as	Notes
US sole prop / SMLLC	Owner's Draw (equity)	Not an expense; not payroll
US partnership	Partner Draw (equity) per partner	Guaranteed payments are an expense
US S-corp	Salary (payroll expense) + distributions (equity)	Reasonable salary required before distributions
US C-corp	Salary (expense) and/or dividends (equity)	Dividends are not deductible
Canadian sole prop	Owner's Draw (equity)	Taxed via T2125 on the T1 regardless of draws
Canadian corporation (CCPC)	Salary (expense, T4) or dividends (equity, T5)	Choice is a planning question — see optimizing-business-taxes

Country	Rule	Source
US	Keep records ≥3 years from filing (6 if income underreported >25%)	irs.gov — Recordkeeping
Canada	Keep records 6 years from the end of the last tax year they relate to	canada.ca — Keeping records

Transfers between own accounts are not income or expense — book as transfers, or revenue is overstated.
Credit-card payments are not expenses — the expense was recorded at purchase; the payment clears 2100.
Sales-tax input credits (Canada): GST/HST paid on purchases is recoverable for registrants — track in an ITC account, don't bury it in the expense.
Negative liability or negative asset balances in the trial balance almost always mean a mis-signed entry — investigate before closing.
"Miscellaneous" over ~2% of expenses means categories are missing — split it.