Accounting 101 for Tourism Businesses

by sara | February 5, 2025

Every tourism business owner should know the fundamentals of accounting. We can help with that.

In the Season 2 premiere of the Destination: Northern Ontario podcast, Chartered Professional Accountant Dave Covello, a Partner at MNP, explains the basics, including the difference between bookkeeping and accounting, when you should incorporate, the importance of good record-keeping, and the pros and cons of asset sales versus share sales. He also shares a tip that’ll help you save money on accounting fees.

Listen now, or read on for a few highlights.

The Difference Between Bookkeeping and Accounting

Bookkeeping involves daily tasks like paying bills and recording transactions, which generate accounting data. After bookkeeping, this data can be used for accounting tasks like generating financial statements and conducting trend analysis to inform business decisions. Dave stresses the importance of both bookkeeping and accounting for business growth and improvement by reviewing past actions and planning for the future.

Deciding How to Structure Your Business

There are three main business structures: sole proprietorship, partnership, and incorporation. Sole proprietors and partners are taxed personally, while incorporated businesses benefit from a lower tax rate of 12.2% on the first $500,000 of income. If you plan to take all of your revenues as salary, then sole proprietorship is the best option because it’s the most straightforward. Incorporation is recommended if you plan to leave some of the revenues in the business, allowing for tax savings and reinvestment opportunities.

Share Sales vs Asset Sales

When buying a business, sellers usually prefer selling shares to benefit from capital gains exemptions, while buyers typically want to buy assets for tax deductions and to avoid inheriting liabilities. Negotiations are necessary to find a mutually agreeable price, balancing the seller's tax benefits and the buyer's desire for a higher cost base on assets and lower liability risk.

Business Expenses: Keep Your Receipts and Keep Them Reasonable

Dave highlighted the necessity of keeping all of your receipts—in physical or digital form—to verify expenses in case CRA comes looking for proof. His rule of thumb for what can count as an expense is money spent in an attempt to generate revenue, such as travel and fuel costs in the tourism industry. Mixed business and personal expenses should be prorated reasonably.

File Your Taxes on Time To Stay Off CRA’s Radar

If you're late in filing taxes and owe a balance, the CRA charges non-deductible interest and penalties. Consistent lateness draws CRA attention and can potentially result in overestimated assessments. To avoid stress and additional costs, file on time. To make the task more manageable, spend an hour or two at the end of each month organizing receipts. This will also help you save on accountant fees.

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Next time on the podcast, we’ll tackle another topic many business owners struggle with: marketing.