What your books have to prove, and for how long

Every figure in your accounts is a claim. The audit trail is what turns each claim into something you can support — a path from the number on the statement back to the event that caused it.

The chain#

It runs in both directions, and both matter.

Downward, from a total to its parts: a P&L line, to the accounts inside it, to the journal entries, to the source document. This is the direction an auditor takes, and the direction you take when a number looks wrong.

Upward, from a receipt to where it ended up. This is the direction you take when someone asks whether a cost was recorded — and the one that catches things recorded twice.

A break anywhere makes both directions fail. The usual break is at the bottom: the entry exists, the document does not.

What counts as a source document#

A record produced at the time of the transaction by someone with reason to record it accurately. Supplier invoices, customer invoices, receipts, contracts, bank statements, payroll registers.

A bank statement line is not a source document for what was purchased. It proves money moved and to whom. It says nothing about what you bought, whether it was for the business, or how much tax was on it — which is exactly what a deduction or an input tax credit depends on.

This is why "it is on the bank feed" is not a filing system. The feed gives you completeness; the documents give you support.

How long to keep it#

In Canada the general rule is six years from the end of the tax year the records relate to — longer than it sounds, because the clock starts at the year end rather than the transaction. A receipt from early in a fiscal year is effectively kept nearly seven.

Some records outlive that. Anything supporting the cost of an asset you still own must survive until six years after you dispose of it, because that is when the gain is computed. Records relating to the acquisition or disposal of a business, and certain corporate records, are longer again or permanent.

Destroy records early and the CRA can require you to reconstruct them, with the burden on you. Permission to destroy early exists, but it has to be asked for.

Electronic records are records#

Scans and digital originals are acceptable, provided they are readable, complete, and retained for the same period. The practical requirements are the boring ones: the file still opens in six years, it is findable, and the retention survives the software that created it.

That last point is the one that bites. Records held only inside a system you stop paying for are records you no longer have. Any accounting system worth using should let you export the ledger and its attachments in a form that outlives the subscription.

What makes a trail defensible rather than merely present#

Three properties, and the middle one is where most systems quietly fail.

Completeness — every transaction is in there. Reconciliation is what proves it.

Immutability — a posted entry cannot be silently changed. If it can, the trail records the current state of a database rather than what happened, and an auditor has no reason to trust any of it. Corrections have to be visible reversals that leave both entries in place.

Attribution — who did what, and when. Increasingly that means distinguishing a person from an automated actor: once an assistant can post to your books, an entry with no actor is a gap in exactly the place the trail should be strongest.

Comma enforces all three. Entries are never edited in place, corrections are linked reversals that swap every side exactly, every change lands in an audit log, and actions taken through a connected assistant are tagged as such.

The immutable ledger post is the longer argument for the second one. The handover template covers where documents live — the question a successor asks first and gets answered least often.