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One area that is prone to having errors are the corporate tax payable and tax expense accounts. All of the various taxes that a business owner pays, should be indicated in its own tax payable account. In Alberta, that means that there is going to be a separate entry for federal and provincial taxes. Entrepreneurs that are coming out of province may not know this, so it is very important to understand according to Edmonton bookkeeping. In other provinces, business owners pay with federal and provincial tax to Canada revenue agency, who then calculates the amount of provincial tax that needs to be paid, and forwards it to that province on behalf of the business owner. In Alberta, there is the department called Alberta finance, so an entrepreneur actually makes 2 separate payments for federal and provincial tax.
Business owners also need to understand that the GST does not get paid onto the federal tax payable accounts. Edmonton bookkeeping says that this is a typical error made by entrepreneurs, under the justification that GST is a federal tax. However, it is a different tax and so it gets its own account. Business owners should also be aware that there are two separate payroll tax payable accounts. One is the withholding account, for the entrepreneur to put all of the source deductions payments that is withheld from their employees paychecks. And the other one is where the business owner must make.
By regularly reviewing all 5 of these tax payable accounts, entrepreneurs can ensure the accuracy of them. This is owners should get familiar with how many payments are going into these accounts and how often, and approximately how much is being entered each time. If there is any amounts that does not show up when it should, or it is an amount far greater or far less than what it typically is, business owners can verify the accuracy of the numbers, and fix them if they are wrong.
By keeping their interim financial statements as accurate as possible, business owners are ensuring that their financial statements continue to be a powerful tool that they can use in order to help guide their financial decisions in their business. Whether it is checking to ensure the accuracy how effective their marketing program is, checking to see if they have enough money to buy assets, or if they can hire that much-needed new staff member.
When business owners are making financial decisions in their business, Edmonton bookkeeping says that it is very important that the use whatever tools they can to help them make informed decisions. Since half of all entrepreneurs in Canada close their business within 5 years, and 29% of those failed entrepreneurs say the reason that their business failed is because they ran out of money. If entrepreneurs are able to make better financial decisions, they can increase the probability that they can avoid that reason for business failure.
Business owners should be checking their tax payable accounts for accuracy, because it is very possible and very easy for errors to happen in these sections. One of the reasons for that is because there are 5 tax payable accounts in all, making it very easy for entrepreneurs to accidentally co-mingled payments. Edmonton bookkeeping says that if business owners can review each of the 5 accounts, and verify that nothing has been posted to a different account by mistake, they can help ensure the accuracy of these tax payable accounts.
Another way to verify the accuracy of the tax payable accounts, is if entrepreneurs look to ensure they never have tax payable amounts come out on their accounts payable section. While many business owners might see this and think it is okay for tax payments to show up on their accounts payable since it is a payment, Edmonton bookkeeping says that this is not where tax payments should ever show up. Accounts payable should purely be for all of the bill payments that a business owner makes that is not tax related.
Edmonton bookkeeping says that entrepreneurs also need to verify that there tax payments do not show up on their profit and loss statements. Business owners can take a quick check every month to ensure that no tax payments are showing up on that statement, and if it is it can be a quick fix.
Another way for entrepreneurs to verify the accuracy of their tax payments, is to understand that in the tax expense account, there will only ever be one entry each year into that account. Since entrepreneurs do not know what their tax will wait until the end of the year, be they should ensure that nothing is posted in this account until the very end of the year. When their accountant is working on their fiscal year end, they will get the tax bill and make the entry into this account. Business owners who are making tax payment instalments, should understand that because they are not paying it on bill that exists yet, pre-paying a liability will show up as a negative number on their financial statement. There tax expense account will have a balance of zero meanwhile their tax payment accounts will have a negative number. When the accountant boasts that payment on their financial statement, it will make the negative numbers in their tax payment account zero out.
