Edmonton Bookkeeping | Watching For Errors On Tax Payable Accounts
43% is what average Canadians spend on taxes according to Edmonton bookkeeping, and that includes CPP, EI, GST, and fuel tax just to name a few. Business owners also have to pay a significant amount of their profit in taxes, including federal, provincial, GST and payroll. By understanding how these various taxes look on their interim financial statements, business owners can verify that there tax payable accounts are accurate, which in turn can verify the accuracy of their financial statements. The reason it so important for entrepreneurs to have accurate interim financial statements is as an entrepreneur needs to make decisions in their business, they should be consulting those financial statements to help guide them towards the most beneficial decision for their business.
In order for entrepreneurs to watch their tax payable accounts for errors, they need to understand what their tax payable accounts are. Every time an entrepreneur makes tax payment, it will be indicated in their financial statement in a tax payable account. Since entrepreneurs will pay 5 different taxes, there will be 5 different tax payable accounts. Edmonton bookkeeping says it is important to note that as business owners make these payments, it is going to show up on their balance as a negative amount. The reason for this is because business owners will not be getting their tax bill on what they owe until the end of the year, and any time a business owner pre-pays a liability in their business matter what it is, it is going to show up as a negative number.
This brings a business owner to understand what the tax expense account is on their financial statements. Edmonton bookkeeping says that this account is dedicated to the taxes that a business owner is assessed for the entire year. However, entrepreneurs should understand that is owners do not get assessed but taxes they need to pay until the end of their fiscal year. As their accountant is working on their corporate year-end financial statements, they will be the only ones to enter the amount of taxes that a business owes into this tax expense account. When the accountant enters this amount, all of the negative balances from the tax payable account will be eliminated.
Because the tax expense account will only ever have one entry made, which is not by the business owner, it will be very easy to verify the accuracy of this section of the financial statement on a regular basis. On entrepreneur needs to do is ensure that no entries are being made to this account ever. If expenses end up here, business owners can be certain that it is incorrect says Edmonton bookkeeping.
Business owners can always be ensured that their taxes are never higher than the prophets of their business. By verifying the accuracy of their tax accounts, business owners can be certain that they are accounting for all their taxes properly and minimizing any errors. This will ensure the most accurate interim financial statements possible if business owners ever need them in order to make decisions in their business.
When entrepreneurs are utilizing Edmonton bookkeeping in order to get their interim financial statements, they should be aware that any financial statements that are prepared by anyone other than a chartered professional accountant may have errors on them. The reason this is important is so that because of the possibility of errors existing on financial statements, business owners should always get into the habit of reviewing those interim financial statements when they get them to verify the accuracy and correct any mistakes that may have been made. If entrepreneurs get into this habit early in their business, they can ensure that the financial statements that they have on hand any time they need to make financial decisions in their business have a higher chance of being accurate and financial statements that are not checked regularly for errors.
When business owners are checking their financial statements for errors, they should understand some common areas that errors can exist. Edmonton bookkeeping says that one of the more common areas that have errors in a financial statement is the accounts payable section. Business owners should never see any taxes that they pay anywhere other than the tax payable accounts that are on their financial statements. However, some software defaults the tax amounts into the accounts payable section of the financial statement. If business owners are not aware of this, they may allow the software to put payments in any default sections. Business owners should be watching for this, and error to verify it is not happening on their financial statement.
It should also verify that tax payments are not being posted to an expense account. Edmonton bookkeeping says that this is an error that many entrepreneurs make, because they see tax payments as an expense of their business. This is technically accurate, however the tax expenses of the business will be indicated in the tax expense account, and is put there by the accountant when they have calculated the amount of tax that an entrepreneur owes at the end of their fiscal year. Business owners can review their business expense account to verify tax amounts are not being put here.
Once entrepreneurs are familiar with the various tax payable and tax expense accounts that will be on their financial statements, business owners should also be looking over their financial statements for the prophets in their business. Edmonton bookkeeping says that By reviewing the profit in their business versus the taxes that they pay, can help an entrepreneur understand if they need to generate more revenue in their business. By doing this, business owners can be proactive in reviewing their financial statements and seeing if there is something that needs to be done either increasing revenue or cutting expenses. by understanding all of the various tax accounts in their business, and how that looks compared to their profit, business owners can ensure that they are using their financial statements as a tool to make great decisions in their business.