Edmonton Bookkeeping | How To Ensure Financial Statements Are Correct.
Entrepreneurs need to be ever vigilant when reviewing financial statements in order to ensure that they are error-free says Edmonton bookkeeping. The reason is so important, is because business owners will use those financial statements in order to make fiscal decisions throughout the year. If there are errors or mistakes on the financial statements of the business on an interim basis, chances are quite high that business owners can make decisions that may not be in the businesses best interest. This could cause entrepreneurs to run into financial hardship in their business. Industry Canada says that half of all entrepreneurs fail in their business by year five, and that 29% of those failed entrepreneurs said that they failed because they ran out of cash. Business owners need to make the best financial decisions possible, in order to avoid running out of money in their business and increasing their chances of succeeding.
One of the easiest ways for business owners to catch errors on their financial statements is to look at all of the various tax payable accounts and the tax expense accounts. This is a common place for interim financial statements to have errors, and if business owners can learn how to review that section and correct the mistakes, Edmonton bookkeeping says that they can be that much more reliable financial statements for business owners to utilize. The tax expense accounts on a business owners interim financial statement is going to show the amount of tax that a business owner has been assessed. Since a business owner will only get their tax bill at the end of their fiscal year, this amount should actually zero out to nothing for the entire year in business. If business owners see anything getting posted to this account, throughout the year they should understand that it is a mistake. All of the taxes that they pay, will get zeroed out at the end of the year once the accountant makes the entry.
Edmonton bookkeeping says that aside from the tax expense account, business owners need to understand what the tax payable accounts are. For each of the various taxes that business owners have to pay, there will be a separate account for the amount that the business owner pays in the entry is made every time the business owner makes a payment. There should be five in total that include federal, provincial, GST and to payroll accounts one as a payroll expense one as at tax expense. Business owners who familiarize themselves with each of those accounts and how much should be going in how often, they can guard against errors. For example, the payroll account they have entries every two weeks, where the GST account may have entries only once º.
By getting informed from Edmonton bookkeeping, business owners will be better armed to review their financial statements, catch errors and have more accurate financial statements which to use as a tool in their business to make great financial decisions.
Making important financial decisions throughout the year, business owners need to be doing so with as much information as they can get says Edmonton bookkeeping. The way that business owners can do this, is by reviewing their financial statements to see the financial state of their business before making any decisions that will impact those finances. However, if business owners are not verifying the accuracy of those statements before they make decisions based on them, they may end up making poor financial decisions than they would otherwise if the statements were correct.
It is extremely important for entrepreneurs to know how to review their financial statements for errors in order to ensure their correctness. Business owners need to understand when they are looking at their tax payable and tax expense accounts, how those should look because this is a common area for errors to occur, and therefore is an extremely easy place to look for errors. When the most important things that business owners can look for, is that all of their tax payable amounts be listed in their various accounts and never in accounts payable. This is one of the most common errors, often because various payroll softwareís made defaults tax payments to the accounts payable section. If business owners are not aware of this, and they are letting their accounting software just make the decisions for them, they could end up with incorrect financial statements.
Business owners should also understand when there reviewing their financial statements that profits should be hire then there corporate tax instalments. Since business owners cannot calculate their corporate tax instalment payments on a monthly basis because it is impractical, therefore they need to be aware that their profits should be higher than their corporate tax instalments. Edmonton bookkeeping says that if it is not, this means that a business owners profits are less than their tax instalments therefore they are losing money. If a business owner sees that there corporate tax instalments are higher in their profits, that is a good indication that a business owner needs to increase the revenue.
However, business owners should understand that the prophets do not have to exceed CRA, payroll and GST remittances. The reason for this is because the corporate taxes are paid out of profit says Edmonton bookkeeping. But the CRA, payroll taxes are already included in the employment expense so a business owner does not need to deduct them again. It is very similar to GST as it bypasses the income statement altogether.
By being familiar with how their financial statements look, business owners can use their review of the financial statement and fixing the errors in such a way that it helps them correct mistakes that they find, with that whenever they need to make a financial decision in their business, they can do so understanding that those financial statements will be as error-free as possible.