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E-Myth – “Why most small businesses don’t work & what to do about it”

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Edmonton bookkeeping | ensuring accuracy of financial statements


Entrepreneurs should do in their business is blindly trust the financial statements prepared by Edmonton bookkeeping. Any time a business owner has a financial statement that is not prepared by their chartered professional accountant, business owners should get into the habit of learning how to review those financial statements for errors. The reason this is so important is that any time a business owner might need to make an important financial decision in their business, they should be utilizing their financial statements. If they are kept error-free, business owners will be better able to utilize the statements in order to help guide them make the best decision possible.

Business owners need to understand that one of the reasons why errors can easily occur all these financial statements, is because they use of accounting software, and how easy does for errors to have been without business owners even being aware of it. Edmonton bookkeeping says that many accounting software programs will default payment accounts incorrectly if business owners are not to acutely aware of this as they are making their entries into their accounting software, this can end up with errors. By reviewing these interim financial statements on a regular basis, business owners can catch these accounting software errors.

Edmonton bookkeeping says one of the first things that business owners be aware of when they are entering their tax payable information, is that it should never appear in their accounts payable section of their financial statements. However, in many accounting softwareís, tax payments actually default to this account which is incorrect. If business owners are not aware of this when they make their entries they can end up with errors throughout their financial statements and not even know it. This is why it is so important for business owners to review their financial statements on a regular basis no matter what.

Edmonton bookkeeping since another way that entering tax payments can trigger errors throughout the financial statement is if they are excellently posted to the expense account the business. The reason why this error happens frequently is that business owners think that taxes are expensive the business, and therefore it makes sense to put in there. Unfortunately, well taxes on expense of the business, also have their very own tax expense account, and if they are put into the regular expenses of the business, can end up having those expenses being accounted for twice which can make huge errors throughout the financial statements.

By knowing what to look for when they review their financial statements, business owners can ensure that their financial statements are as accurate as possible. As Jim Collins, the author of 6 business books has said ìthoughtless reliance on technology is a liability.î By blindly accepting whatever results their accounting software gives them, business owners are putting far too much reliance on their technology which is causing errors on their financial statement. By putting more thought process into it, business owners can significantly impact the accuracy of their interim statements.

Entrepreneurs understand how many taxes they have to pay, and how that can impact the financial statements that are prepared for them by Edmonton bookkeeping. However, because taxes are such a huge part of the payments that business owners need to make, they should be aware also of how they appear on the financial statements of the business. The reason business owner should be aware of this, is so that they can make it a habit to review those interim statements often and minimize errors.

In order to understand how taxes should look on the financial statements of the business, entrepreneurs should understand what those tax expense accounts look like. There are tax payable accounts over entrepreneurs are going to be indicating every time they make a tax payment. Edmonton bookkeeping says that for every different type of tax that they pay, there will be a different account in their financial statement for it. Business owners also need to realize that since they will not have their tax bill until the end of the year, they are essentially making installment payments in advance of receiving the bill. When entrepreneurs prepay a liability, it ends up looking like a negative number on their financial statements. This is important to note because business owners who take a look at their tax payable accounts and see negative numbers should know that those are not errors.

The tax expense account on the other hand, is all of the taxes that a business owner owes for the entire year. The reason why it is important to note, is because businesses do not get their tax bill until the end of the year, so this account should be at zero for most of the year. When the fiscal year end comes, and the business owner hands over their information to their accountant to work on their corporate year-end, the accountant will figure out the amount of taxes owed, and be the only one to make an entry into this account. Edmonton bookkeeping says that this can be an extremely easy check for entrepreneurs if they see any amount entered into this account by anyone ever except for their accountant at year-end, it is an obvious error that they can immediately correct.

By understanding how they are tax payable accounts are going to look in their financial statements, business owners just need to realize how many tax payable accounts there are, and why they need to use them. The most common mistake according to Edmonton bookkeeping is for entrepreneurs to put the GST account and with the federal tax accountant. This would be incorrect, as they need to be kept separate. Also included in the tax payable accounts are provincial tax and to separate payroll tax accounts.

By understanding how to read their financial statements and reviewing them on a regular race for errors, business owners can be sure that there interim financial statements are as accurate as possible should they ever have a need to review the information to help guide them towards an important business decision.