I have a small business in Ontario Canada and I file my taxes each year. Let's say I discover an erroneous invoice from the last fiscal year for which I've already submitted my tax returns to the government. Hence, it was part of the reported taxable income. The invoice was an erroneous duplicate that was never paid and it was never sent to my customer.

What is the proper accounting approach to remedy this situation after the fact? If I try to edit the original invoice within the fiscal year that it was issued, that means I have to get an accountant to send an amended return? Or am I to just create a new invoice in my current fiscal year with the same but negative amount as the original invoice ? Or should I be issuing a credit memo against my original invoice?

I tried to search for this problem on the internet, but I couldn't find a comprehensible answer that deals with erroneous invoices in previous fiscal periods.

I am using accrual based accounting method.

2 Answers 2


Applying a credit memo this year and making the reduction to your income this year is perhaps acceptable in some instances, but you are denying yourself early tax relief by doing this.

Technically, you should be able to refile last year's tax return with an amendment showing that you are revising your income. Depending on the $ value, this effort may not be worth it.

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    The invoice amount is very small, so it's not worth it this time. But this is very useful advice for any larger amounts in the future Jul 12, 2018 at 16:24

My accountant finally got back to me. He says he's ok with me creating a credit memo to be applied against the erroneous invoices of previous fiscal periods.

From my cursory research in the last hour or so, it seems that's one of the functions of credit memos.

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