Edmonton Bookkeeping | Accounting Software Errors On Financial Statements
There are several reasons why interim financial statements that are not being prepared by accountants may be inaccurate or have errors says Edmonton bookkeeping. One of those reasons is that the accounting software that business owners used to input various about this on a regular basis can often be put into the wrong account, triggering errors throughout the entire financial statement. Since financial statements that are not being prepared by accountants are not having those errors checked, business owners should get into the habit of regularly reviewing their interim financial statements to guard against these easy to catch errors.
There are several ways that interim financial statements can be inaccurate due to software errors, and that includes when business owners make tax payments, they make them to the wrong account and they get tracked onto the payable accounts and get reflected on the profit and loss statement of the business. Edmonton bookkeeping says that this is an extremely common occurrence, and in order to guard against this error perpetuating more errors in the statements, business owners should review the profit and loss statement on their financial statements and compare it to the tax payable accounts. If there are any amounts that are the same, business owners should verify why.
Another way that accounting software makes errors on financial statements, is when tax payments are accidentally posted to a business expense account. When they tax payment goes to a payable account, it is can end up on a business expense account instead of the tax expense account, which can mean that when the accountant puts in the taxes at the end of the year, that those tax expenses are counted twice. This can trigger errors throughout the entire financial statements, and if not caught early, can in sure that the financial statements are extremely out. Edmonton bookkeeping says this is very important to watch for.
Another way that business owners should be aware that accounting software can cause problems when making tax payments, is that accounting software often defaults tax payments to the accounts payable section of the financial statement. Payroll software often defaults money there, so if a business owner is not careful when they are first making their entries into the software, this can happen. If they do not know what to look for when reviewing financial statements, that error can continue to perpetuate an end up making all of the financial statements inaccurate.
Edmonton bookkeeping says that by understanding that software is not infallible, and by taking steps to review their financial statements, business owners are ensuring that their financial statements are accurate as often as possible. As Jim Collins, the author of 6 business books including bestseller good to great says, ìthoughtless reliance on technology is a liability.î One of the reasons why it is very important for entrepreneurs to have accurate financial statements is because as they make decisions in their business, first consulting their financial statements can help entrepreneurs make informed decisions that can benefit their business.
One of the ways that business owners can end up with inaccurate financial statements says Edmonton bookkeeping, is when they use accounting software, and do not double-check the accuracy of that software. Since different accounting software can have different default settings, business owners should not blindly trust that those software programs are always putting everything in the correct place. By reviewing their financial statements on a regular basis, business owners can catch software errors and ensure the overall accuracy of their statements.
To understand how accounting software can create errors for businesses, entrepreneurs should understand the difference between tax payable accounts and tax expense accounts, as this is a significant place where software makes errors. Edmonton bookkeeping says the payable account is where all of the various taxes that are paid are noted for. There will be 5 different tax payable accounts that business owners need to be aware of, and watch for errors. It is very easy for entry errors to be made here, because of the 5 separate payable accounts, and how easy it is to put the wrong entry in.
The tax expense account is the section in a financial statement that is where a business owners taxes that they owe are entered. The only entry that should ever be made into this account is by an accountant, at the business’s fiscal year-end when they calculate how much tax an entrepreneur owes. Checking this is very easy, if entrepreneurs see that there is ever any entries made into this account before their accountant, it is an error that needs to be fixed.
The various tax payable accounts should be fully understood in order to help entrepreneurs avoid making accounting software entry errors. Edmonton bookkeeping says that one of the biggest mistakes made is when are these owners attribute the GST tax that they pay to the federal tax accountant. While GST is a federal tax, they each have their own account and they should not coexist together. Another tax payable account that has entry errors is in the provincial tax payable account. The reason for that, is because Alberta is the only province where they pay provincial taxes separate from the federal taxes. Entrepreneurs that have owned businesses elsewhere in the country come to Alberta and often make this error.
Another way that business owners can review their tax accounts to guard prayers, is understanding how their tax payable accounts are going to look as they make their entries on a regular basis. Edmonton bookkeeping says that since business owners will not know the taxes that they owe until the end of the year, business owners are essentially prepaying their taxes by making entries into their payable tax accountant. By prepaying this liability, entrepreneurs should understand that the amounts that appear in their payable account will be a negative number. The more they pay the larger that negative number is and once the accountant calculates the amount of tax owed at year-end, they enter that balance in those payable account balances come to zero. By understanding this ahead of time, can help business owners understand that negative numbers and all of their tax payable accounts are not errors.