Bookkeeping for Restaurants in Canada: A Complete Guide

Why Restaurant Bookkeeping is Different

Restaurants operate differently than almost every other small business in Canada. Unlike a consulting firm that invoices monthly, a restaurant does hundreds of small transactions every day — cash, debit, credit, delivery apps, gift cards — each of which needs to flow accurately into your accounting records.

Add to that: daily tip reconciliation, food and beverage cost tracking, high employee turnover and complex payroll, HST on every sale, and razor-thin margins — and you have one of the most bookkeeping-intensive industries in Canada.

Most general bookkeepers aren't familiar with restaurant-specific requirements. This guide explains what proper restaurant bookkeeping looks like and why it matters for your bottom line.

Daily Sales Reconciliation

The foundation of restaurant bookkeeping is the daily sales reconciliation. Every day, you need to reconcile:

• ●Your POS system's end-of-day report (total sales by type)
• ●Cash drawer close (actual cash vs. expected)
• ●Credit/debit card batch totals
• ●Delivery app payouts (DoorDash, SkipTheDishes, Uber Eats)
• ●Gift card activations and redemptions

Each of these flows into a single "daily sales" entry in your accounting software that splits revenue across: - Food sales (taxable at 13% HST in Ontario) - Alcohol sales (taxable at 13% HST) - Taxes collected - Tips received (if controlled) - Delivery fees (separate revenue line)

Doing this daily — not weekly — is critical. Restaurant transactions are too numerous and cash-heavy to reconcile accurately if you let them stack up.

Food and Beverage Cost Tracking

Food cost is the most important expense metric in a restaurant. Without tracking it properly, you're flying blind.

What to Track

• ●Cost of Goods Sold (COGS): All food and beverage purchases that were consumed in the production of sales
• ●Opening and Closing Inventory: Monthly inventory count to calculate actual COGS (not just purchases)
• ●Supplier Invoices: Every invoice from food distributors, beverage suppliers, and service providers must be entered and categorized

The Formula

Actual Food Cost % = (Opening Inventory + Purchases – Closing Inventory) ÷ Food Revenue × 100

If your food cost % is trending up without a corresponding increase in revenue, something is off — whether that's waste, portioning errors, theft, or supplier price increases.

Most bookkeeping software can track this automatically once your chart of accounts is set up correctly.

Restaurant Payroll: The Most Complex Piece

Restaurants are labour-intensive, with payroll typically representing 30–35% of revenue. The complexity comes from:

Hourly Employees with Variable Schedules Part-time and casual staff with variable hours need accurate time records each pay period. Payroll errors in hourly calculations are one of the most common bookkeeping issues for restaurants.

Tip Reporting and Allocation This is where most restaurants get into trouble with CRA.

Controlled tips (when the employer collects and distributes tips, as in many service-charge situations): These are employment income. They must go through payroll — CPP, EI, and income tax deductions apply.

Direct tips (given directly from customer to server): Not subject to CPP/EI, but are taxable income for the employee. The employee is responsible for reporting them on their personal tax return.

Tip pool arrangements: If employees share tips among themselves, you must document the arrangement and ensure the allocation method is consistently applied.

CRA has increased scrutiny on restaurant tip reporting in recent years. Proper documentation protects both the business and employees.

Source Deductions and Remittances CRA remittance deadlines are strict. New employers remit monthly; once payroll grows, you may move to twice-monthly or accelerated schedules. Missed remittances trigger penalties immediately.

HST for Restaurants

Restaurants must charge HST on virtually all sales. Key points for Ontario restaurants:

Important: The $4 takeout rule catches many restaurant owners off guard. If you sell individual items under $4 (coffee, muffin, small sandwich), those sales may only be subject to the 5% federal GST, not the full 13% Ontario HST. Your POS system and chart of accounts must be set up to track these separately.

Input Tax Credits (ITCs)

Restaurants can claim ITCs on most business purchases: food and beverage supplies, kitchen equipment, packaging, uniforms, software, rent (if your landlord is HST-registered), and utilities. Proper tracking of HST paid on purchases is essential to minimizing your net HST owing each quarter.

Chart of Accounts for Restaurants

A properly structured chart of accounts for a restaurant includes:

Revenue Accounts: - Food Sales - Beverage Sales - Alcohol Sales - Catering Revenue - Delivery App Revenue - Gift Card Revenue

Cost of Goods Sold: - Food COGS - Beverage COGS - Alcohol COGS - Paper/Packaging

Operating Expenses: - Labour — Kitchen - Labour — Front of House - Labour — Management - Employee Benefits - Rent and Common Area Maintenance - Utilities - Repairs and Maintenance - Marketing and Advertising - POS and Technology - Smallwares and Supplies

Without this structure, your P&L won't tell you what you actually need to know to run the business.

Monthly Bookkeeping Checklist for Restaurants

The Cost of Poor Restaurant Bookkeeping

Restaurants with inaccurate books typically discover the damage too late:

• ●CRA penalties for late or inaccurate HST filings
• ●Payroll audits triggered by inconsistent tip reporting
• ●No visibility into food cost creep — losing 2–3% of revenue to waste or theft with no data to catch it
• ●Year-end accounting fees of $3,000–$8,000 to clean up disorganized records
• ●Loan applications denied due to insufficient financial documentation

How Outsource Bookkeeping Serves Restaurants

We understand the daily rhythm of restaurant operations — POS reconciliation, tip allocation, food cost tracking, and CRA compliance. Our flat-rate model at $500/month includes everything: daily sales recording, supplier invoice processing, payroll entries, HST preparation, and monthly CPA-ready reports.

Book a free consultation to discuss your restaurant's specific bookkeeping needs.