Restaurant Bookkeeping in Canada: The 2026 Guide

Restaurant bookkeeping differs from generic small-business bookkeeping in five concrete ways: tips flow through payroll under specific CRA rules, food cost has to be measured against a recipe-level theoretical benchmark, daily sales need to be reconciled from the POS, cash handling needs formal controls, and labour cost moves week to week, not month to month. Get these five right and the rest of the books follow. This guide walks through each, in the order they show up in a working kitchen.

How tips actually flow through payroll

The CRA splits tips into two categories, and the split decides whether payroll touches them at all.

The distinction is about control of the money, not the label on the receipt. A "tip pool" the restaurant collects and redistributes by formula (hours worked, sales generated, role) is controlled — it goes through payroll like wages, with the employer share of CPP and EI applying on top. A server who pockets a cash tip directly never touches the restaurant's payroll at all. Where restaurants get this wrong: booking a weekly tip-pool payout as a simple till disbursement rather than a payroll run, which understates both the employee's insurable earnings and the employer's CPP/EI liability. Our CPP, CPP2 and EI explained guide covers how those federal deductions are calculated once tips are correctly on payroll.

Food and beverage cost percentage

Food cost percentage — cost of food sold divided by food sales — is the number every kitchen manager watches, but it is only useful if it is built on accurate, timely inventory, not a purchases-only plug. The bookkeeping mechanics:

1. Opening inventory (last count) + purchases during the period − closing inventory (this count) = cost of food sold for the period.
2. Divide by food sales for the same period to get food cost %.
3. Do the same calculation separately for beverage and, where licensed, alcohol — margins and tax treatment differ, so blending them hides which category is actually performing.

Skip the physical count and food cost becomes purchases divided by sales — a number that ignores what's actually still on the shelf and can mask a real problem for months.

Theoretical vs actual cost: where the leak is

Theoretical (ideal) food cost comes from standardized recipe costings — what each plate should cost given its exact ingredients and portions. Actual food cost comes from the count above — what the kitchen actually used. The gap between the two is the diagnostic:

• A small, consistent gap is normal (trim loss, minor over-portioning).
• A growing gap points to over-portioning, comps and voids not being tracked, waste, spoilage from poor rotation, or shrinkage.

Comps, voids and staff meals need their own account codes in the POS, tracked against a reason and — ideally — a manager approval, rather than being buried in a blended "discounts" line. Without that detail, a rising actual-vs-theoretical gap has no obvious cause to chase.

Daily sales reconciliation from the POS

The POS end-of-day (Z-report) is the source document for the day's bookkeeping entry, not the bank deposit. A proper daily reconciliation ties together:

• Gross sales and sales tax collected from the POS Z-report,
• Tips collected by payment type (cash vs. card),
• Payment-type split (cash, debit, credit, gift card, third-party delivery), and
• The bank deposit and processor settlement statement, which typically lags the POS by one to two business days and nets off processing fees.

Doing this daily — not batched at month-end — is what catches a till shortfall, a missed deposit, or a processor fee change while it is still a small, explainable number. Sales tax on prepared food and beverages has its own rules and provincial variation; see the restaurant tax guide for how GST/HST and provincial tax apply to what a POS is actually ringing through.

Cash-heavy internal controls

Restaurants handle more cash, more often, than most small businesses, which is exactly why informal controls fail here first. The baseline controls worth formalizing:

• Segregation of duties — the person counting the till is not the person who records or makes the deposit.
• Void/comp/discount approval — a manager PIN and a required reason code on every void, comp or discount, reviewed against the daily reconciliation.
• Till float and shift-count discipline — a fixed starting float, counted and signed at shift start and end.
• Daily bank reconciliation, not monthly — catches a shortfall while there is still a shift's worth of evidence to explain it.

Labour scheduling and cost control

Labour is usually the second-largest cost line after food, and unlike food cost it can swing sharply within a single week — one over-staffed slow Tuesday shows up immediately in that week's prime cost (food plus labour as a share of sales). Scheduling against forecasted covers, reviewing actual labour percentage against sales daily rather than waiting for month-end payroll reports, and tracking overtime as it accrues rather than after the pay run closes are what keep the number stable. The employer share of CPP, CPP2 and EI adds to the loaded cost of every scheduled hour — model it with the employer payroll cost calculator.

How RN Canada helps

RN Canada's bookkeeping & payroll service sets up restaurant-grade books — tip payroll classified correctly, inventory-backed food cost, daily POS reconciliation and cash controls — so the numbers are reliable enough to run the business on, not just file taxes from. For the sales-tax side, see our restaurant tax guide and full industries: restaurants page.

This page is general information, not personalized tax, accounting, or legal advice. Speak with RN Canada about your specific situation.