Introduction

Small business owners in Quebec often launch their companies with passion, not accounting knowledge and that’s normal. But relying on accounting myths instead of proper financial practices can lead to cash-flow problems, inaccurate books, missed deductions, and even CRA or Revenu Québec audits. This guide exposes five of the most damaging accounting myths and provides the facts every entrepreneur needs, supported by guidance from a CPA firm near you in Montreal.

Legal and Regulatory Framework

Under the Income Tax Act, the Taxation Act of Quebec, and Canadian GAAP requirements, small businesses must:
• Maintain accurate books and records
• Track all income and expenses
• Separate business and personal transactions
• Keep documentation for at least six years
• Apply correct GST/QST rules
• Produce financial statements that reflect reality

Believing accounting myths often leads to non-compliance, denied deductions, penalties, or financial blind spots that hold back growth.

Key Court Decisions

Courts have consistently ruled that:
• Owners are responsible for proper bookkeeping, even when delegating tasks
• Lack of receipts results in denied deductions, regardless of owner intentions
• Not knowing the law is not a defense in cases of reassessment
• CRA may reconstruct income using bank deposits when books are inaccurate
• Mixing personal and business finances increases the likelihood of penalties

Judges emphasize that accurate accounting is a legal obligation, not a preference.

Why CRA and Revenu Québec Target These Myths

Many business owners unknowingly trigger audits by relying on misconceptions such as:
• Thinking bank balances equal profits
• Believing GST/QST only applies at year-end
• Treating personal purchases as business deductions
• Not tracking cash sales
• Assuming software alone guarantees accuracy

Tax agencies use POS data, merchant statements, banking records, industry benchmarks, and third-party reporting to detect inconsistencies tied to these myths.

The 5 Accounting Myths Small Business Owners Need to Stop Believing

1. “If I have money in the bank, my business is profitable.”

False.
Bank balance ≠ profit.
Profit requires analyzing revenues, expenses, cost of goods sold, depreciation, and taxes. Businesses with high sales but high expenses often run out of cash because they confuse liquidity with profitability.

2. “I don’t need bookkeeping because I keep all my receipts.”

Incorrect.
Bookkeeping isn’t just storing receipts — it involves recording transactions, reconciling bank accounts, categorizing expenses, and producing accurate financial statements. CRA requires organized records, not shoeboxes of receipts.

3. “Software like QuickBooks or Shopify will handle everything automatically.”

Dangerous myth.
Accounting software automates tasks but does not:
• Categorize expenses properly
• Detect errors in entries
• Apply complex GST/QST rules
• Reconcile accounts
• Ensure year-end compliance

Software is a tool — not a substitute for proper accounting.

4. “Small businesses don’t need to separate personal and business finances.”

Absolutely wrong.
Mixing finances causes:
• Denied deductions
• Incorrect income reporting
• Difficulty tracking GST/QST
• Increased audit risk
• Cash-flow mismanagement

A separate business bank account is mandatory for clarity and compliance.

5. “I can always fix my books at year-end.”

Risky and expensive.
Waiting until year-end leads to:
• Lost receipts
• Incorrect GST/QST filings
• Missed deductions
• Reconciliation errors
• Higher accountant fees
• Cash-flow surprises

Good monthly bookkeeping prevents costly year-end cleanups.

Mackisen Strategy

At Mackisen CPA Montreal, we help small business owners replace myths with accurate financial systems. We:
• Set up clean, compliant bookkeeping systems
• Reconcile accounts monthly
• Separate business and personal expenses
• Optimize GST/QST tracking
• Build financial dashboards to monitor profitability
• Prepare accurate year-end tax filings
• Provide proactive financial guidance

Our approach prevents costly errors and creates clarity for decision-making.

Real Client Experience

A Montreal retailer believed her POS system was enough for bookkeeping. CRA audited after finding sales inconsistencies. We rebuilt her books, reconciled merchant statements, corrected GST/QST filings, and minimized penalties.
A contractor used one bank account for business and personal expenses; his expenses were denied. We restructured his financial system and recovered allowable deductions with proper documentation.

Common Questions

How often should small businesses update bookkeeping?

Monthly is best — weekly for high-volume businesses.

Does bookkeeping software replace a CPA?

No. Software records transactions, but a CPA ensures accuracy, compliance, and strategy.

What happens if I mix business and personal expenses?

You risk deductions being denied and may trigger an audit.

Can I correct past bookkeeping mistakes?

Yes. Adjustments can be filed for several prior years.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps small businesses adopt reliable accounting practices that support compliance, growth, and profitability. Our expert team ensures your financial foundation is strong, accurate, and audit-ready.