Edmonton Bookkeeping | Reviewing Tax Accounts For Accuracy
While many entrepreneurs understand how important it is to review the financial statements they received from Edmonton bookkeeping for accuracy, what entrepreneurs might not know is how important it is to review their tax payment and tax expense accounts within those financial statements, because mistakes can happen very easily on those sections as well. Default settings and accounting software, as well as confusion on behalf of the business owner, can result in a higher instance of errors being made in the tax payable accounts of the financial statement. By being aware of this, business owners can ensure that they are checking extremely well on those sections to minimize errors and ensure the accuracy of their interim statements.
In order to review those statements for accuracy, business owners should understand what tax payable accounts and tax expense accounts are. Edmonton bookkeeping says that a tax expense account is where all of the taxes that a business has is going to be indicated here. There is only one tax expense account, and until business owner gets the tax bill for their corporation, this amount is going to stand at zero. Since entrepreneurs only get their tax bill at the end of the year, once they give their financial information to their accountant to work on their corporate year end, the accountant will be the one that enters the amount of taxes into this section. Business owners who know this can ensure that no other expenses are being entered into this account, because if anything gets added other than the accountant it will be incorrect.
The tax payable accounts, on the other hand, have several different accounts that business owners must keep straight. For each of the different taxes that business owners pay there is going to be a new payable account. Every time a business owner makes a payment towards any of the taxes, they should indicate which tax they paid in the appropriate account. As mentioned in the paragraph above, business owners who are making their tax payments even though they do not yet have their bill, should understand how it appears on their financial statements. Edmonton bookkeeping says that any time an entrepreneur pays a liability in advance of getting the bill, it is going to show up on the financial statements as a negative number. Business owners should not be shocked or panicked when they continue to pay their taxes and see that that number is growing in the negative amount. Once the accountant enters the taxes that the business owes, it will make the payable account numbers balance out to zero.
It is extremely important that business owners understand how these 2 different tax accounts work in the financial statement, so that business owners can review those sections and verify that if there are any mistakes that they are caught in fixed right away. Edmonton bookkeeping says that it is extremely common for errors to exist here, due to the complicated nature of taxes.
Edmonton bookkeeping says that business owners often understand how important it is to have accurate financial statements, but they do not know how to review those financial statements to verify and correct errors. A great way that business owners can start doing this, is by looking at their tax payable accounts on their financial statements. The reason why this is so important, is because entrepreneurs pay a significant amount in taxes, and there are many taxes that I have to pay, so by understanding how to review them, business owners can ensure the overall accuracy of their financial statements.
Business owners should understand that there are 5 separate tax payable accounts that they need to keep straight in their heads as they are making payments. Edmonton bookkeeping says that those 5 accounts are: Federal tax payable account, provincial tax payable account, GST payable tax accountant, and 2 different payroll accounts. There is many tax accounts here that need to be kept separate, but also there are some unique things about each one that business owners need to be aware of in order to ensure the accuracy of.
The first one is that Alberta is the only province that has the provincial tax payable account on their financial statements. The reason is that other provinces pay their federal and provincial tax simply by sending the amount to Canada revenue agency who calculates the amount of provincial tax they owe and sending it off to that province on their behalf. In Alberta however says Edmonton bookkeeping, there is a separate Alberta finance department. When business owners are waiting checks for their federal and provincial taxes, there writing to checks one to Canada revenue agency and the other to Alberta finance. By understanding there is a difference here, business owners can be more able to catch mistakes.
Edmonton bookkeeping says the next area that business owners often have errors in their financial statement is with the GST tax payable account. The reason why this is often incorrect, is because business owners often put the GST with the federal tax accountant, on the justification that it is also a federal tax GST needs to be its own payable account and financial statements, and if entrepreneurs can take note of how often they pay their GST, it canís very easy to review for errors. If they are paying it quarterly, and they see entries made on a monthly basis, that automatically tips a business owner off that there is an error in it.
Since there are 2 payroll tax accounts, business owners need to be very prudent in ensuring that these 2 are kept straight. There is the payroll withholding account where a business owner is going to note the source deductions they withheld from their staff, and then the account where a business owner takes note of the CPP contribution they have to make in addition to their payroll source deductions. By keeping the 2 different tax accounts for payroll organized in their head, business owners can guard against mistakes, or at least go back and review their financial statements and watch for that error.