Edmonton Bookkeeping | How To Indicate Tax Payments On Financial Statements
If entrepreneurs are not sure how the tax payments they are making should show up on their financial statements, it may lead them to not be able to review those financial statements for errors says Edmonton bookkeeping. Since that a significant portion of entrepreneurs money goes towards paying taxes, this is a significant portion of their financial statements that they should be verifying is accurate. Ensuring the accuracy of financial statements is of paramount importance to entrepreneurs because as they make decisions in their business, using accurate financial statements can be a great tool to help guide them towards the best decision possible for their business.
If entrepreneurs are not aware of how their tax payments should show up on their financial account, it may cause them to accept defaults of their accounting software. Edmonton bookkeeping says that often the accounting software that businesses use to input payments can often default tax payments to the accounts payable section of the financial statement. This is not correct, but if business owners are not aware that this is a problem, they may allow the software to make the decision. However, if business owners understand it should not be placed there, they can either avoid your software for making that decision, they can fix it if that air has already been made.
Another area business owners should verify their tax payments are not showing up is in the profit and loss statement. Edmonton bookkeeping says that this is a problem that frequently happens, and tax payable accounts should be the only place where the tax payments are indicated, and if they show up on the businesses profit and loss statement, that should trigger the business owner to look for other areas where their tax payments are showing up improperly.
The 3rd area where tax payments can show up incorrectly is on the expense account of the business. The reason why this is incorrect is because taxes get their own separate tax expense account, so if it shows up in the regular expense account of the business, it will be doubly indicated and that can create huge problems throughout the rest of the financial statement. By reviewing this area, business owners can very easily minimize errors that can significantly impact the accuracy of their financial statements.
Once business owners have verified that taxes have not shown up on various sections of their financial statements where they do not belong, a business owner should also be ensuring that the prophets of their business are higher than the taxes that they are paying. If they end up paying more in taxes than they are profiting in their business, that could be an indication that the business is losing money. If entrepreneurs see this, they should immediately take steps to increase the revenue in their business, as well as reviewing their financial statements to see if there are any expenses that they can cut. By reviewing their financial statement often, business owners can ensure that they are better able to make proactive decisions in their business that can positively impact their business.
Business owners may not take into consideration exactly how much tax they are paying in their business says Edmonton bookkeeping, and do not realize how all of those various payments can greatly impact their financial statements if they have been entered incorrectly. By being able to understand how all of the various tax payments look on a business owner’s interim financial statements, entrepreneurs can be mindful of the errors that may exist, and fix them before they create problems for the business owner farther down the line.
One of the most important things that business owners need to understand, is that for every different tax that they pay, there is a different tax payable account where they all must be indicated. There are 5 different tax payable accounts, which means they can be very easy to accidentally put the wrong amounts into the wrong accounts. By knowing what each of the 5 tax payable accounts are, and how to watch those accounts for typical amounts and patterns, business owners can be better armed for catching mistakes on a regular basis.
Business owners will understand that there is a federal tax payable account, and all of the amounts that they pay to Canada revenue agency for their federal taxes gets indicated here. Edmonton bookkeeping says that many entrepreneurs believe that GST should also be entered into the federal taxes payable account, but this is incorrect. This is 1 Easy Way that business owners can ensure taxes are accounted for properly in the financial statements, is to review both the federal tax payable account as well as the GST tax payable account. Reviewing the GST account can be extremely easy, especially the entrepreneur is paying quarterly, they simply have to watch their federal and GST tax accounts for the right frequency of payments.
Entrepreneurs in Alberta also need to understand that there is a provincial tax payable account, that all of the taxes that they pay provincially to Alberta finance gets indicated here according to Edmonton bookkeeping. If there are any entrepreneurs who are opening a business and Alberta after being an entrepreneur in another province should be made aware of this tax accountant, because other provinces allow Canada revenue agency to collect both the federal and the provincial tax and pay the province on their behalf.
The last 2 tax payable accounts are for payroll. There is one payroll account for all of the source deductions that a business owner withholds from their staffís paycheck, and there is also a payroll tax payable account on everything that an entrepreneur contributes, which is the 1.4% CPP that a business owner pays in addition to the employees source deductions. These 2 accounts are also easy to watch for errors, because a business owner should understand how much is typically deposited into those accounts, and how often payroll is. If payroll is every 2 weeks or twice a month or even monthly, business owners can watch for those patterns and for those amounts.