Edmonton Bookkeeping | What Is A Tax Payable Accounts

Business owners should understand what a tax payable account is on their financial statements, and how to check for accuracy. A tax payable account is the count on the financial statements for a business owner will input all of the tax payments that they make in their business. Business owners need to ensure accuracy of these accounts, first because they will not get a tax bill until the end of the year, and prepaying the liability it shows up as a negative number on the financial statements. Edmonton bookkeeping says that business owners often panicked when they see that they have been making tax payments but it is showing up as a minus.

Another thing that business owners need to keep in mind about their tax payable accounts, is that there are 5 separate accounts that they need to understand in order to verify accuracy of work. The 5 various accounts are the federal tax payable accounts. Anytime a business owner makes instalment payments to federal tax, it gets noted here. Typically business owners will make those payments once a month to Canada Revenue Agency according to Edmonton bookkeeping.

Unique to Alberta, there is also the provincial tax payable account, that business owners must make payment to the Alberta finance department in a separate check. The reason this is unique, is because all of the provinces pay their federal and provincial tax to Canada revenue agency, then calculates the provincial tax for entrepreneurs and sends the appropriate tax to each province.

Edmonton bookkeeping says that business owners also need to be aware that the GST does not get paid to the federal tax payable account, because it has its own account. Whether business owner is paying their GST monthly, quarterly or yearly, they can review this section of their financial statements to verify that the appropriate number of entries has been made into this section.

Finally, business owners should understand that there are 2 separate payroll tax payable accounts. There is a payroll withholding account, where business owner will make payments to every time they take source deductions off of their employees checks, and a payroll employer contribution tax payable account, that is specifically only for the employer to indicate the 1.4% of CPP that they must pay.

When business owners are aware of the various tax payable accounts, then they are much more able to review their financial statements and verify the accuracy of these accounts. If errors happen, they will be better prepared to make corrections.

Canadian entrepreneurs pay a significant amount of their profits in taxes according to Edmonton bookkeeping, and keeping track all of the various taxes that they pay is extremely important. By knowing all of the various tax payable accounts that will exist in their financial statements, business owners can be better prepared to review those financial statements for errors, and fix them if necessary.

Every time a business owner makes a tax payments, it should be posted to each of the 5 tax payable accounts that exist in their financial statements. Many accounting software is that are used in business often default tax payments to the accounts payable section. Edmonton bookkeeping says that entrepreneurs should be aware of this default, and as they are making entries into their software, to be aware that this may happen. If this already has happened, business owners should review their accounts payable section on their financial statement on a regular basis in order to ensure that this air was not made.

Another area where it tax payments are often put in error, is to the expense account. Edmonton bookkeeping says that the reason why business owners often accidentally puts tax payments here, is because they view a tax as an expense of the business. However business owners need to understand that all tax payments need to be made on the tax payable account, because the tax expense has already been will be accounted for elsewhere. If a business owner makes the mistake and puts the payment here, it could mean that the tax payments are indicated twice on the financial statement. By reviewing their expense account to ensure that tax payments were not placed here, business owners can easily catch this air.

Business owners can also ensure that tax payments are not reflected on the profit and loss statement. Edmonton bookkeeping says this is another common error that business owners often see, so that by verifying and reviewing their profit and loss statement, business owners can easily kick out errors if tax payments were placed there.

As owner should also understand that when they are making these tax payments, they are technically prepaying their taxes, because they do not get their tax bill until the end of the year. Their accountant will enter into their financial statements during their fiscal year end amount of taxes that they owe. By reviewing their tax expense account on a regular basis, business owners should just be verifying that nothing has been entered into this account by mistake, because it should only ever have one entry in and that is at the end of the year. Edmonton bookkeeping says that entrepreneurs can easily verify the accuracy of the tax payable and tax expense accounts and their financial statement which can help keep these statements as accurate as possible.