While entrepreneurs have to end up paying for taxes throughout the year, their taxes are calculated once a year says Edmonton bookkeeping. So it is very important that they are keeping track of all the taxes that they pay accurately.
Since their accountant is going to figure out the amount of taxes that they owe for the previous year of business. Entrepreneur needs to keep accurate record of all the taxes that they have paid.
And that once they have paid all the taxes that they have owed for the previous year. That they continue making payments says Edmonton bookkeeping.
The reason why they need to continue making payments. Is so that when their accountant calculates the taxes that they owe for the current year at their next corporate year-end.
They will have already been making payments towards that amount that they owe. Decreasing the payments that they have to make in their next year.
However, it will be very difficult for entrepreneurs to enter their tax payments if they do not know all of the different tax payable accounts that exist.
One of the first things that business owners should keep in mind. Is that they got a federal and provincial tax payable account. This is especially important to take note of. If an entrepreneur has owned a business in another province beforehand.
The reason why, is because only in Alberta does a business owner have to keep track of and pay the federal and provincial tax separately.
In every other province in Canada, an entrepreneur will pay both their provincial and federal taxes to Canada revenue agency.
And CRA will then figure out the provincial taxes that should be sent to the provincial government. And then send it on the entrepreneurs behalf.
Therefore, not only will they have a federal tax payable account but they will also have a provincial tax payable account. The next thing that Edmonton bookkeeping says is that they will have a separate GST account as well.
Despite the fact that the GST is a federal tax, it is separate than the federal taxes that an entrepreneur owes. And therefore, it should be kept separate.
And finally, there will also be a separate tax payable account for payroll. But instead of having just one account for all the payroll taxes. An entrepreneur should have a separate payroll tax accountant for each of the separate payroll taxes that they are responsible for.
Not only do they have an account that is separate for the EI and the CPP that they deducted off of their employees checks. But they also need to have a separate account for both for employers portion of CPP and EI that they also must pay.
Therefore, they can have up to eight different tax accounts. And by keeping all these taxes separate. Can help an entrepreneur understand how much in taxes they have paid. And how much they currently owe.
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When an entrepreneur is starting their business, Edmonton bookkeeping says that they often want to do a lot of the bookkeeping entries themselves. And that is a good idea for several reasons.
While there Edmonton bookkeeping company will most likely get them interim financial statements once a month, or once every six weeks. More entries that an entrepreneur is making themselves. Can increase the accuracy of those financial statements.
Therefore, when an entrepreneur pulls those financial statements prior to making any financial decision in their business. They will be more up-to-date and accurate. Which will result in better financial decisions being made for the business.
It is important that an entrepreneur is looking at these financial statements before making any financial decision. Such as if they have the money to run payroll or pay bills. Or even if they are thinking about an asset purchase or if they are going to pay themselves.
By looking at the state of their business financially. They will be able to the decision that they want to make. Or see that they need to increase their revenue. They might want to increase their marketing, or go on more sales calls.
Or the financial statements that they have might show them that they need to engage in some collect calls. So that they can bring the money that they are owed into their business. So that they can spend that money however they want.
If an entrepreneur has entered the information into their accounting software incorrectly, or have made mistakes. The financial statements that they have could end up being inaccurate. And might show a not they have money in their business that they can spend when they do not.
Since the second most common reason why entrepreneurs fail. Is because they ran out of money. Having accurate and up-to-date financial statements. Can help entrepreneurs make financial decisions that will help them avoid that problem.
Business owners should understand what the difference between a tax expense account in a tax payable account is. So that they can end up avoiding errors on their financials.
The tax expense account says Edmonton bookkeeping. Is for the accountant to put the taxes that they have calculated the business has owed. From doing their corporate year end.
Therefore, the accountant is the only one that is putting anything into this account. And it is only being entered once a year. However, every time an entrepreneur pays any taxes, the amount in the tax expense account will decrease.
The tax payable account on the other hand. Our the accounts where the entrepreneur as well as their Edmonton bookkeeping company will enter all of the taxes that they have paid.
In order to ensure the accuracy of these accounts. Business owners need to be very careful that they know exactly what tax they are entering, and put into the correct tax payable account. Since it can be up to eight different accounts for the various taxes that they owe.
By understanding the difference between these two accounts and their accounting software. Can help entrepreneurs account for their taxes correctly. That will ensure that they have the most accurate and up-to-date financials.