Tax and accounting terms
Chart of Accounts Explained: Setting Up Accounts That Match Your Tax Return
GIFIthe CRA's General Index of Financial Information, which gives every common financial statement line a code. A chart that follows it turns year end into a matching exercise.
Sources checked October 20263 min read
What a chart of accounts is
The chart of accounts is the list of accounts a business records its transactions into: every bank account, every type of revenue, every category of expense. Accounting software builds the financial statements from it, so its structure decides what the statements can show and how much work year end takes.
Accounts fall into five groups. Assets, liabilities and equity make up the balance sheet, which shows the position at a date; revenue and expenses make up the income statement, which shows the result for a period. Total assets always equal total liabilities plus equity, and the CRA checks exactly that on a corporation's return.
Key points
- The chart of accounts lists every account transactions are recorded into, grouped as assets, liabilities, equity, revenue and expenses
- Corporations and partnerships report their financial statements to the CRA using GIFI codes
- Numbering accounts in the same order as the GIFI makes year end mapping simple
- GST/HST, owner withdrawals and capital assets each need accounts of their own
Using the GIFI as the backbone
A corporation filing a T2, and a partnership filing a T5013, reports its financial statements through the General Index of Financial Information. The GIFI gives every common financial statement item a code, such as 1001 for cash, and the return must include certain totals so the CRA can confirm the statements balance. Numbering your own accounts in the same order means each one maps to a single GIFI code at year end.
Farming income and expenses have their own codes from 9370 to 9899, and extraordinary items and income taxes sit at 9975 to 9999. A corporation that does not use tax software and has gross revenue and assets each under $1 million can report on the shorter GIFI Short on paper.
| GIFI codes | Section | Examples |
|---|---|---|
| 1000 to 1599 | Current assets | 1001 Cash, 1060 Accounts receivable |
| 1600 to 2599 | Capital and other long term assets | 1600 Land, 2599 Total assets |
| 2600 to 3139 | Current liabilities | 2620 Amounts payable and accrued liabilities |
| 3140 to 3499 | Long term liabilities | 3140 Long term debt, 3499 Total liabilities |
| 3500 to 3849 | Shareholder equity and retained earnings | 3500 Common shares, 3849 Retained earnings at year end |
| 8000 to 8299 | Revenue | 8000 Trade sales of goods and services, 8299 Total revenue |
| 8300 to 8519 | Cost of sales | 8300 Opening inventory, 8519 Gross profit |
| 8520 to 9368 | Operating expenses | 8520 Advertising and promotion, 9368 Total expenses |
Accounts most small businesses need
Beyond the five groups, a handful of accounts save the most time later.
- A GST/HST account, or a pair for tax collected and input tax credits, so the balance owing at any date matches what the return will show.
- A shareholder loan or owner's draw account, kept apart from wages and expenses, so personal withdrawals never land in a deductible category.
- Separate accounts for capital assets such as vehicles, equipment and computers, which are claimed through capital cost allowance rather than deducted as expenses.
- Payroll liability accounts for source deductions withheld but not yet remitted.
- Revenue accounts split the way the business is managed, such as by service line, without creating so many that coding becomes guesswork.
Keeping the chart useful
The law requires a business to keep records of all its transactions to support its income and expense claims. A chart that is too thin pushes those details into memos; one that is too detailed scatters similar costs across many accounts that all map to the same GIFI line anyway. Review the chart before the first year end and whenever the business changes, rather than adding accounts one transaction at a time.
Quick answers
What is a GIFI code?
A code from the CRA's General Index of Financial Information that identifies a financial statement item, such as 1001 for cash or 8299 for total revenue. Corporations and partnerships use GIFI codes to report their financial statements with their returns.
Does a sole proprietor need GIFI codes?
No. The GIFI applies to the T2 corporation return and the T5013 partnership return. A sole proprietor reports business income and expenses on Form T2125, so a chart that follows its lines works well.
How many accounts should a small business have?
There is no set number. The test is that each account maps to one line of the return or statements, and that two people would code the same transaction to the same account.
Related pages
Official sources
Call or email and we will tell you which records we need and what the work costs, in writing, before anything starts.
Important. This article provides general educational information, not legal or tax advice for a specific business. Rules, administrative policies, rates and deadlines can change. Confirm your facts and current obligations with the responsible government agency and a qualified adviser.