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In order to understand how to keep their financial statements free of tax errors, business owners should first learn what the difference is between tax payable accounts and tax expense accounts. Edmonton bookkeeping says that the tax payable accounts are all of the various tax accounts that business owners make payments to. There will be a different tax accountant for each of the various taxes that a business owner pays. This means there will be federal, provincial, GST and to payroll tax accounts that they need to be familiar with.
Edmonton bookkeeping says that the tax expense account that a business owner needs to be familiar with is the account that will show all of the taxes that a business owner gets assessed per year. However, business owners need to understand that a business gets assessed for taxes at the end of their fiscal year, so this tax expense account should have a balance of 04 their entire fiscal year until the very end. This is one of the most easy ways that entrepreneurs can ensure their financial statement has no errors. If they see an entry at all into that account, they should understand immediately that it is an error.
Business owners should also understand that when they are looking at their tax accounts, only in Alberta will they have a federal and provincial tax payable accounts. Edmonton bookkeeping says that this is extremely important for entrepreneurs who are coming from out of province to understand. The reason for this is because other provinces send all of their tax federally and provincially to Canada revenue agency who then sends each province what they are owed. In Alberta, there is the CRA and Alberta finance. Business owners will write two separate checks for the two various taxes that they pay. Therefore it is indicated on their financial statements separately.
Business owners should understand that the reason why reviewing the taxes is so important, is because it is a very common area for mistakes to happen. Edmonton bookkeeping says that this is for two different reasons, because there are so many different taxes that have to be paid, it is very easy to mix them up and took over mingle them. The other reason is because accounting software often defaults by mistake at tax payment to an expense account. Business owners need to be very vigilant of both of these things so that they can minimize errors on their financial statements.
Keeping financial statements free of errors is very important says Edmonton bookkeeping, because interim financial statements since they are not being prepared by an accountant, are more likely to have errors on them. There are many places where errors are easily made, and business owners should ensure that they are creating statements that are as accurate as possible so that they can continue making financial decisions in their business as easy as possible.
By understanding the difference between tax payable accounts and tax expense accounts, business owners can ensure that they are making a better decision in their business and keeping their statements error-free. A tax payable account is the accounts that a business owner makes on the balance owing of their business. As they pay the taxes down, it decreases on their expense account. The tax expense account is where the business owner is going to have indicated all the taxes that they owe from their business throughout the year. Since this amount is only indicated at the end of the year, business owners should be aware that this account is zero during their entire fiscal year. If they see any accounts that are made on this area, it is surely an error.
When entrepreneurs are reviewing their financial statements for errors, they should never see tax, payroll or GST amounts indicated in the accounts payable. Business owners may have accounting software that defaults those tax payments to accounts payable, therefore business owners need to be extra vigilant in order to guard against this mistake according to Edmonton bookkeeping.
Be aware that their profits should be higher than corporate tax instalments because if a business owner is paying higher taxes than their profits, and that means that a business is losing money. They should ensure that they are keeping track of how much their profits are versus all of their corporate tax instalments, and if their profits are not higher than their instalments, they need to increase the revenue of their business in order to ensure that they do not lose money at the end of the year.
However, business owners need to understand according to Edmonton bookkeeping that profits do not have to exceed CRA payroll and GST remittances. Since corporate taxes are paid out of the profit of the business however Canada revenue agency and payroll taxes are already included in the employment expense, an entrepreneur should be vigilant that they are not deducted twice because just like GST, it completely bypasses the income statement altogether.
When entrepreneurs are reviewing their financial statements for accuracy, why reviewing their tax payable and tax expense accounts, they can catch easy errors, that can increase the accuracy of their financial statements and help them make the most informed financial decisions of their business. When it comes to making asset purchases in their business, hiring staff, or needing to increase revenue, having the most error-free finances are vitally important to entrepreneurs.
