Edmonton Bookkeeping | Why Tax Payable Accounts Are Different In Alberta
According to the Fraser Institute, the average Canadian pays 43% of their income in taxes, and Edmonton bookkeeping says that the highest marginal tax rate in Alberta tops out at 48%. On average, 37% of the remaining income goes towards paying for necessities such as clothing, food, and shelter. Since taxes make up a significant portion of not just employees, but entrepreneurs as well, business owners need to be diligent when reviewing their financial statements to minimize errors. The biggest reason for this is as entrepreneurs make financial decisions in their business, having as correct financial statements as possible can ensure that they are making the best financial decision that they can.
When it comes to tax payable and tax expense accounts, entrepreneurs should understand the difference between the 2, and why it is different in Alberta. The tax expense account is the accounts that show the amount of taxes total that an entrepreneur needs to pay. As an entrepreneur pays taxes to the various departments, that balance decreases. For the tax payable account, these of the accounts where business owners will note what each of the tax payments they made to each department says Edmonton bookkeeping.
Entrepreneurs in Alberta need to understand that only in Alberta are these tax payable accounts going to look a little bit different. In most other provinces, entrepreneurs will pay their provincial and federal taxes to the Canada revenue agency. CRA will then calculate the amount of provincial taxes that were paid, and send that amount to the province on behalf of the business owner. In Alberta however, Edmonton bookkeeping says that there are separate departments for Alberta finance. So when a business owner wants to pay their federal and provincial taxes, they must write 2 separate checks. The send-off their federal taxes to the Canada revenue agency, and they will send their provincial taxes off to Alberta finance. This is extremely important for entrepreneurs who are coming from other provinces to know.
To completely understand tax payable accounts and how it appears on their financial statements, entrepreneurs need to realize that there are 5 different tax payable accounts. There is the provincial and federal accounts, as well as the GST payable account, where a business owner will note every time they pay their GST which is typically quarterly. And the payroll withholding account. This will have entries every time a business owner runs payroll, to take into consideration the source deductions that a business owner takes off of their employee’s checks as well as the source deductions that a business owner pays.
My understanding of all of these various payable accounts, business owners can then be more knowledgeable when they are reviewing their financial statements to be mindful of errors. Edmonton bookkeeping says that it is very easy for the wrong taxes to get posted into the wrong payable accounts, so business owners need to be very mindful of this to watch and correct errors.
When entrepreneurs are reviewing their financial statements that are being prepared by Edmonton bookkeeping, they should be mindful that there may be errors in those financial statements. By watching for mistakes, business owners can correct them, and then be able to use their financial statements to make important decisions concerning money in their business without worrying that they will make the wrong decision based on errors on the statements.
One of the most common ways that mistakes happen on financial statements of the business, is on the tax payable and tax expense accounts. If entrepreneurs can understand the difference between the 2, they will be able to watch and correct errors more easily. The tax expense account according to Edmonton bookkeeping is where the taxes that a business owner owes throughout the year will get noted. The only time and entry should be made on this account, is during the fiscal year-end being prepared by an accountant. A business owner can know this and watch to see if any additional entries were being made into that account, because if there are they are incorrect.
The next thing that an entrepreneur needs to know is what a tax payable account is. This is where the business owner will have all of the various taxes that they may be indicated. A business owner should understand that there will be a separate account for each of the different taxes that they are responsible for paying. It is also important to note according to Edmonton bookkeeping, that these various accounts are different in Alberta than they are anywhere else in Canada. To understand how this is owners should understand what the different tax accounts are.
There is the federal tax payable account, where a business owner will indicate what installments they have made towards paying for federal tax. Other provinces pay all of their provincial and federal tax this account, and Canada revenue agency will calculate the amount of provincial tax that needs to come out of that payment and send it off to the provincial government. However, in Alberta this is different. The business will only pay the federal tax to Canada revenue agency, so I will let goes to the federal tax payable account are those payments. The next tax payable accounts are the provincial tax payable account, which is payable to Alberta finance. Entrepreneurs from other provinces should understand that this is different so that they do not end up paying both provincial and federal taxes to the Canada revenue agency. Then there is the payroll withholding account, that every time a business owner runs payroll, should have an entry for all of the source deductions that a business owner takes off of the employee’s checks as well as the source deductions that a business owner is also responsible for. Finally, there is the GST payable account is. Whether a business pays there GST monthly, quarterly or yearly, every time they make a GST payment it will end up in this account.