Edmonton Bookkeeping | Accurate Tax Payment Accounts
Paying all of the various tax accounts that exist in a business may be confusing to a lot of entrepreneurs says Edmonton bookkeeping. However, since paying taxes is a significant part of the payables of a business, entrepreneurs should be aware of how to review those payments in their interim financial statements in order to help mitigate any errors that may have happened when making those entries.
When business owners are making their tax payable account entries using their accounting software, they should be very mindful of all the different accounts that exist, so that they can ensure not to accidentally commingle any of the payments together. Edmonton bookkeeping says that this is one of the most common areas for entry errors to happen, but can be extremely easy to fix as well.
Business owners will have the federal tax payable account as well as the provincial tax payable account. It is very important to note that these 2 accounts are separate because Alberta is the only place where that happens. The rest of Canada pays all of their provincial and federal tax to Canada revenue agency, who calculates the amount of provincial tax each business owes and passes along on their behalf to each province. However, Alberta has the Alberta finance department, if entrepreneurs are not aware of this, or are coming from out of province, they may make errors on entering the taxes in this account.
Business owners also tend to make the mistake of attributing the GST payable accounts to the federal tax accounts. Edmonton bookkeeping says that this is also very common error because many business owners think GST is federal tax, so it belongs there. And while this is true, it also gets its own account on a businesses financial statement.
As owners also need to be aware that even though there is a payroll tax payable account, there is not just one there is 2 of them. One is the payroll withholding account, which is for any time the business owner takes source deduction payments from their staff. The 2nd payroll account is for the business owner to pay their own CPP that they owe. By understanding that there is 2 accounts, and what each one is for, entrepreneurs can be careful to ensure that they are not co-mingling all of the payments together.
When entrepreneurs are using their accounting software to enter these payments, they should also be extremely careful that there is no entry errors as well. No matter how careful business owner can be said Edmonton bookkeeping, some software programs can default tax payments to the wrong accounts, triggering errors even if business owners are being very careful. They should be aware of this before they start entering payments, but also be aware of this when there verifying information on the interim statements later, they can double-check that errors have not been made here.
By not relying on the accuracy of accounting software, entrepreneurs can review their financial statements for accuracy, ensuring that any time they need to use those statements in order to make important financial decisions, that they have the most accurate tool available.
If entrepreneurs are not checking their interim financial statements from Edmonton bookkeeping for errors, or if they have not learned how to read them, is owners may not be making prudent financial decisions in their business, because they are unaware of the most up-to-date financial information. Keeping up-to-date financial statements is a huge importance to business owners so that they can be proactive in their business as well as use those statements to help guide their business decisions. If an entrepreneur does not use the financial statements, they are making an uninformed decision and could end up negatively impacting their business.
When it comes to verifying the accuracy of financial statements, business owners should look at their tax payable accounts. Edmonton bookkeeping says that the reason this is one of the first places that entrepreneurs should check is because it is one of the easiest ways to verify information, and is a common area where errors occur. When entrepreneurs are entering in payments into their accounting software, they should be aware that taxes are often accidentally defaulted to the accounts payable section of the business. While this often makes sense for entrepreneurs, because they see taxes is an expensive business, they actually get their own tax payable section, and does not belong here. Unfortunately, because accounting software often defaults to this account, it can be difficult for business owners to avoid unless they know ahead of time.
When entrepreneurs are reviewing their financial statements they also need to understand that tax payments should not be posted to an expense account. Edmonton bookkeeping says again the reason is because tax accounts exist on their own, and there is a tax expense account section in the financial statements. But more important than that, since the accountant is the only one that is going to enter the tax expense which is going to happen at the end of the year, if an entrepreneur is accidentally entering the taxes as an expense of the business in addition to that, they can end up with tax expenses being duplicated in the financial statement. Business owners should avoid that, because this could trigger incorrect financial statements in many different areas of the statements.
Entrepreneurs also needs to verify that their tax payments do not get reflected on the profit and loss statement of the business. Edmonton bookkeeping says that this is again, and error, because many businesses believe that taxes make sense to show up on the profit and loss statement, but they get their own section and so it should not even appear on the statement. Less business owners are aware of that, by blindly accepting the default settings of their accounting software, business owners may perpetuate this error. By knowing what to look for, and not accepting that their accounting software is going to be infallible, is owners can ensure the accuracy of their financial statements by doing regular reviews.