Home » Articles » Edmonton Bookkeeping | How To Account For Tax Payments
Edmonton Bookkeeping | How To Account For Tax Payments
When entrepreneurs are making entries into their accounting software, Edmonton bookkeeping says that they should be very careful and watch for common errors that could occur. By keeping financial statements as accurate as possible, business owners can ensure that there able to make great financial decisions in their business and help them avoid the reason why many entrepreneurs fail. As Jim Collins, the author of 6 books has said, ì thoughtless reliance on technology is a liability.î business owners should be verifying the accuracy of interim financial statements, not only because there are more likely to have errors on them because are not being prepared by an accountant, but also because accounting software is not infallible, double-checking these statements on a regular basis can help ensure the accuracy of those numbers.
One of the biggest mistakes that accounting software often creates when dealing with taxes, is that it often puts the various tax payments that are being made into the accounts payable section of the financial statements. Edmonton bookkeeping says that this is a typical air, because many softwareís defaults to that, so business owners need to be careful not to accept any time a software wants to put entries into a default section. Business owners should always be ensuring that any of the tax payments they make get posted to the correct tax payable account.
The tax payable accounts themselves often have errors in them as well, simply because there are five different accounts that entrepreneurs need to be aware of, and know the difference of says account Edmonton bookkeeping. by understanding the difference between each of the 5 accounts, business owners can ensure the accuracy of all of the postings to each of those accounts. There is the federal account, as well as the provincial accounts and both of these are separate, there is also the GST account which does not get counted in the federal tax accountant. And to different payroll tax accounts one for the payroll that a business owner withholds from their staffs paychecks and one that the business owner pays themselves. By understanding all of the differences between these accounts, entrepreneurs can watch for errors, and fix them easily.
Entrepreneurs should alsoís ensure that all of their various tax payments do not get reflected on the profit and loss statement. Edmonton bookkeeping says that if tax payments are excellently entered into accounts payable, they may end up on the profit and loss statement of the business which is not accurate, but very easily caught as an error if it does happen.
When entrepreneurs understand that the financial statements they receive on an interim basis are not necessarily going to be error-free, they can get into the habit of reviewing those financial statements when they come in, so that they can be as accurate as possible. Even though a business owner may not be utilizing the statements on a regular basis, any time they need to make financial decisions in their business, they should ensure the accuracy of those financial statements ahead of time so that when they need to use them in their business, they are ready.
Since entrepreneurs need to pay so many different taxes as a business owner, Edmonton bookkeeping says that it is extremely important that business owners know how each of those tax payments look on their financial statement. When they understand how those tax payments look, they will be better able to fix any mistakes that they find, to ensure the overall accuracy of their financial statements. Since the statements can be a powerful tool that business owners use to help them make decisions in their business, ensuring the accuracy at all times is very important.
Business owners should understand what a tax payable account on a tax expense account is on their financial statements. A tax expense account is where all of the taxes that a business owner is assessed gets indicated on their financial statements. Even though a business owner pays many different taxes throughout the year, there is only going to be one entry into the tax expense account, and it is going to be once a year. Edmonton bookkeeping says that as a businesses accountant works on their corporate year-end, they will be able to calculate the amount of taxes that a business owner owes, and then make that one entry into the tax expense account.
The tax payable account on the other hand, are all of the various accounts for all of the various taxes that entrepreneurs pay throughout the year. They will be making instalment payments on the taxes that they owe, but because they will not get a tax bill until the end of the year, business owners need to understand that they are the paying their taxes. When they do this, Edmonton bookkeeping says that prepaying a liability will show up on the financial statement as a negative number. If business owners are not aware of this ahead of time, they may panic when they see that there is a negative balance on all of the various taxes that they have been paying throughout the year. However, once an accountant enters the taxes that a business owner owes, it will go towards the negative balance of the taxes that the business owner has paid, bringing the melons back to zero.
When business owners utilize Edmonton bookkeeping in order to verify the accuracy of their financial statements and understand how the various payments look, they can ensure that any time they need to make financial decisions in their business, their interim financial statements can be a great tool that can help guide them towards the right decision no matter what it is. If entrepreneurs need to generate more revenue, purchase assets or figure out if they can pay themselves, all of those decisions can be made easier by looking at their financial statement.