Edmonton Bookkeeping | Differences Between The Various Tax Payable Accounts

Business owners should first understand what the tax payable accounts are, these are all of the various accounts that a business owner will use to indicate all of the various taxes that they are paying in their business. When they make tax instalments, this will be indicated in their tax payable account.

The first tax payable accounts that business owners should be aware of is the federal tax payable account. This is where all of their Canada revenue agency taxes get paid, with the exemption of the GST. Even though GST is a federal tax, it is not paid indicated in this payable account. All of the money that a business owner sends off to Canada revenue agency should be accounted for here. Since business owners will not get a tax bill from Canada revenue agency until the end of the year, it is important that business owners are making regular installment payments.

There is also the provincial tax payable account, which is unique to Alberta says Edmonton bookkeeping. Entrepreneurs need to make provincial payments to the department called Alberta finance. All of the provincial taxes that they pay must be paid to this account. This is not the way it is done in other provinces, entrepreneurs outside of Alberta send all of their provincial and federal tax to Canada revenue agency, then calculates the provincial tax and sends it to the province on behalf of the business owner. If entrepreneurs are coming from outside of the province, they should be very aware that it is handled differently here.

Business owners previously have been told that the GST does not get accounted for in the federal tax payable account, and this can be an easy one to verify the accuracy of, because business owners often make GST payments on a quarterly basis. If they see amounts monthly, or less often then quarterly, they can be assured that it is an error Says Edmonton bookkeeping.

the last 2 tax payable accounts are for payroll. Many entrepreneurs do not understand why there has to be 2, but one is for the source deductions that an entrepreneur withholds from their staffs paychecks, and the other one is specifically for the business owner, because entrepreneurs also need to pay CPP in addition to what they withheld from their employee’s checks. This can be the easiest one to verify, because business owners should know how often they are running payroll, approximately how much should be deposited into this account regularly, because unless they hire a bunch of people, that amount should state fairly similar from month-to-month.

When reviewing the financial statements in their business, business owners need to ensure the accuracy says Edmonton bookkeeping. The reason that so important, is because interim financial statements are more likely to have errors on them, and business owners should be using financial statements in order to guide their financial decisions in their business. If business owners are not checking these statements for errors, they could end up making financial decisions that negatively impact their business.

One of the easiest ways that business owners can review their financial statements for errors, is to look at their tax payable accounts. There are 5 various accounts for each of the taxes that business owners must pay in their business. While each of the tax payments should be indicated in each of those tax payment accounts, sometimes business owners will find that those amounts actually posted into accounts payable. Edmonton bookkeeper says that this is actually an error of the accounting software that business owners sometimes use, which defaults tax payments to accounts payable. If business owners are not careful when they are entering information into their accounting software, they can easily have this error happen.

Business owners should also be verifying that all of the various tax payable amounts do not get reflected on their profit and loss statements. Edmonton bookkeeping says that this is another common air that can easily be discovered and fixed. Doing a quick review of the profit and loss statement on their interim financial statements, business owners can ensure that tax payable amounts do not get put here.

Many entrepreneurs also believe that tax payable accounts should go on to expense accounts because they see taxes as a business expense. If entrepreneurs understand that there is a separate tax expense account, where all of the tax that they owe will be put at the end of the year, they can avoid taking additional entries into the expense account of the financial statements. Edmonton bookkeeping says that if business owners do this, they can accidentally double up tax expense that is indicated on their financial statement. By understanding what the different expense accounts are and what should be posted in each one, business owners can minimize errors and avoid having their taxes accounted for twice on their financial statements

When entrepreneurs are able to review their financial statements on a regular basis and fix easy to find errors, they can ensure that their financial statements are able to be used as a tool in their business to help guide their financial decision-making. When entrepreneurs make financial decisions based on facts, they can avoid making decisions that will negatively impact their business. Since half of all entrepreneurs in Canada fail in business before their 5th year, and 29% of those entrepreneurs say the reason why they fail is that they ran out of money, avoiding this problem can significantly increase businesses chances of success.