Common Bookkeeping Errors and Fixes

Introduction
Understanding common bookkeeping errors and fixes is essential for business owners, self-employed professionals, corporations, real estate investors, e-commerce sellers, and anyone responsible for financial records. Poor bookkeeping is one of the leading causes of CRA and Revenu Québec reassessments, cash flow problems, denied deductions, incorrect GST/HST/QST filings, and business inefficiency. Even minor errors — missed invoices, misclassified expenses, or unbalanced accounts — can grow into major issues. This guide explains the most common bookkeeping mistakes in Canada and how to fix them professionally so your business stays compliant and audit-ready.

Legal and Regulatory Framework
Common bookkeeping errors and fixes fall under the Income Tax Act, CRA books-and-records requirements, GST/HST and QST legislation, ASPE and GAAP accounting standards, Québec’s Taxation Act, payroll compliance rules, and financial reporting guidelines. CRA requires businesses to keep complete and accurate books and records for at least six years. Failure to maintain proper records can result in penalties, denied deductions, and tax reassessments.

Error 1: Mixing Personal and Business Transactions
This is one of the most common bookkeeping mistakes among small businesses. Using one bank account for both personal and business expenses makes it almost impossible to track true profits, claim deductions accurately, or defend expenses during an audit.
Fix:
open a dedicated business bank account
use separate credit cards for business
reimburse personal payments with clear documentation
CRA frequently audits accounts with mixed transactions, so separation is essential.

Error 2: Not Reconciling Bank and Credit Card Accounts
Many businesses fail to reconcile accounts regularly, resulting in missing transactions, duplicate entries, or incorrect balances. Without reconciliation, financial statements and tax filings become unreliable.
Fix:
reconcile accounts monthly
match each transaction to receipts or invoices
use accounting software like QuickBooks or Xero with automated reconciliation tools

Error 3: Incorrect GST/HST and QST Recording
Many bookkeeping errors stem from wrong tax classifications. Examples include:
charging GST when you should not
failing to charge QST to Québec customers
not separating zero-rated export sales
misapplying GST/HST across provinces
Fix:
review place-of-supply rules
set up tax codes correctly in accounting software
perform GST/QST reconciliation every filing period
incorrect GST/QST reporting is a top CRA and ARQ audit trigger.

Error 4: Misclassifying Expenses
Salaries recorded as subcontractor payments, capital purchases recorded as expenses, or personal expenses recorded as business expenses can lead to denied deductions and penalties.
Fix:
classify expenses consistently
use CRA business expense categories
differentiate between capital assets and operating expenses
keep documentation to support classification

Error 5: Incorrect Payroll Calculations
Payroll errors include:
wrong CPP/QPP calculations
incorrect EI or QPIP deductions
missing source deduction remittances
improper T4 or RL-1 slips
Fix:
use payroll software or outsource payroll to professionals
remit source deductions on or before the 15th
review annual T4/RL-1 requirements

CRA and Revenu Québec penalize payroll mistakes very aggressively.

Error 6: Ignoring Accounts Receivable and Aged Invoices
Businesses often fail to follow up on unpaid invoices, hurting cash flow and creating unrealistic financial statements. Income may be overstated if invoices are never collected.
Fix:
review aged receivable reports monthly
implement collection procedures
write off uncollectible invoices only with proper support

Error 7: Not Tracking Inventory Properly
Inventory errors distort COGS, gross margin, and taxable income. Common mistakes include:
not recording inventory purchases correctly
using cash accounting for inventory-based business
failing to adjust inventory at year-end
Fix:
use accrual accounting for inventory
perform regular physical counts
track landed costs including duties, shipping, freight

Error 8: Forgetting to Record Depreciation (CCA)
Depreciation or Capital Cost Allowance is often missed, resulting in overstated income or incorrect asset values.
Fix:
maintain an updated asset schedule
apply correct CCA classes and rates
review capital additions annually

Error 9: Missing Supporting Documentation
CRA requires invoices, receipts, contracts, bank statements, and mileage logs. Missing documents may cause CRA to deny expenses.
Fix:
keep digital copies of all receipts
use apps for receipt management
maintain mileage logs for vehicle expenses

Error 10: Incorrect Foreign Currency Conversion
Businesses dealing with U.S. revenue or expenses often convert amounts incorrectly, leading to misreported income or capital gains.
Fix:
convert using Bank of Canada daily or annual rates
track currency gains separately
ensure consistency for tax reporting

Error 11: Misreporting E-Commerce Revenue
Shopify, Amazon, Etsy, and PayPal deposits often don’t match sales due to fees and refunds. Many businesses report net deposits incorrectly instead of gross sales.
Fix:
record gross sales
record merchant fees separately
reconcile platform reports to bank statements
CRA targets e-commerce mismatches aggressively.

Error 12: Not Backing Up Accounting Data
Losing accounting data due to software failure or device loss can result in lost records and CRA penalties.
Fix:
use cloud-based accounting systems
set up automatic backups
store documents in secure digital folders

Error 13: Incorrect Year-End Cutoff
Recording revenue or expenses in the wrong period causes inaccurate financial statements.
Fix:
use accrual accounting
ensure year-end adjustments are made
review accounts payable and receivable at year-end

Error 14: Overstating Business Deductions
Claiming excessive meals, travel, or home-office deductions is a common mistake that can trigger CRA review.
Fix:
follow CRA deduction limits
keep receipts and support documents
track mixed-use expenses correctly

Error 15: Not Reviewing Financial Statements
Many owners never look at their P&L, balance sheet, or cash flow, resulting in financial blind spots.
Fix:
review financial statements monthly
analyze trends
identify discrepancies early
meet with your CPA quarterly

Key Court and CRA Positions
Courts have confirmed that businesses must maintain accurate and complete books and records. CRA frequently reassesses when bookkeeping is inconsistent, missing, or poorly documented. Judges often side with CRA when taxpayers cannot substantiate claims with proper documentation.

Why CRA and Revenu Québec Audit Bookkeeping Records
common underreporting of income
incorrect GST/QST filings
cash-intensive businesses
inventory mismatches
T-slip verification discrepancies
unusual patterns in expenses
CRA reviews bookkeeping quality as part of every audit. Poor records often result in estimated assessments.

Mackisen Strategy
Mackisen CPA provides complete bookkeeping correction, cleanup, and audit-proofing. We rebuild financial records, correct GST/QST errors, reconcile bank accounts, fix inventory and COGS problems, prepare payroll adjustments, restore asset schedules, implement cloud accounting, and ensure full CRA and ARQ compliance. We also train clients to maintain accurate books going forward.

Real Client Experience
A Montréal e-commerce business had years of unreconciled Shopify sales; Mackisen rebuilt records and resolved a CRA audit. A contractor mixed personal and business expenses; we corrected filings and avoided reassessments. A Québec consultant failed to charge QST; we registered and corrected past returns. A corporation overstated expenses with missing receipts; Mackisen reconstructed records and defended deductions.

Common Questions
Can poor bookkeeping trigger a CRA audit? Yes, very commonly.
Are receipts required for every expense? Yes, especially for meals and travel.
Can I use cash accounting? Only for certain small businesses.
Do e-commerce sellers need accrual records? Yes — required for inventory.
How often should I reconcile accounts? Monthly.

Why Mackisen
With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps business owners eliminate common bookkeeping errors and fixes, strengthen financial reporting, and stay fully compliant with CRA and Revenu Québec. Our expert team ensures accuracy, efficiency, and audit-proof books.