It is almost as important for entrepreneurs to enter the taxes that they paid properly says Edmonton bookkeeping. As it is to ensure the accuracy of their entire financial statements.
Both are extremely important. And entering the tax payments that they have made correctly. Will also help ensure the accuracy of their financial statements as well.
One of the first things that entrepreneurs should take into consideration, is what their tax expense account is. And what their tax payable accounts are. So that they can tell a difference between the two.
The first thing that entrepreneurs should take into consideration. Is the tax expense account. Is for their accountant to enter how much taxes they owed in the previous year. Once they have completed the corporate year end for the business.
Since entrepreneurs will not know how much they owe in taxes until the end of the year. Edmonton bookkeeping says it is incredibly important that entrepreneurs continue to pay taxes in instalments. Even when the previous year that they owed for no longer has any outstanding taxes.
The next thing that business owners need to keep in mind. Is that their accounting software is going to default tax payments to this tax expense account. Therefore, not only do they need to understand that this is not accurate.
They also need to know where to put the tax payments that they are making. So that they do not make mistakes. This is where understanding the various tax payable accounts is important.
One of the first things that business owners should take into consideration. Is that they will have as many different tax payable accounts as there are taxes that they have to pay in their business.
As in Alberta business. Entrepreneurs will have more tax payable accounts then entrepreneurs in other provinces. Because while all provinces will have a provincial and federal tax.
Only Alberta requires businesses pay their provincial and federal taxes separately. In fact, most other provinces simply send their federal and provincial taxes to Canada revenue agency.
Who will figure out how much the entrepreneur owes their provincial government. And then simply send that payment to the provincial government on behalf of that business.
Therefore, business owners who are entering taxes into their tax payable accounts. Should take into consideration that they need to know if they are paying a federal tax or provincial tax to enter that information correctly.
Next, they will have a GST tax payable account. Because the way they calculate GST is different. And will allow entrepreneurs to enter that amount separately.
And finally, Edmonton bookkeeping says that business owners will have various tax payable accounts for all the different payroll taxes that exist. From income tax, to the employer and employee portion of both EI and CPP.
There payroll tax payable accounts will be five, and then GST, federal and provincial for a total of eight tax payable accounts that they must keep separate.
Once entrepreneurs have figured this out, every time they pay a tax. They should know what tax they are paying. And then ensure that they account for it properly and their accounting software.
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Learning how to do their own bookkeeping can be very complex says Edmonton bookkeeping. However, it is very important that entrepreneurs learn how to do this. In order to get the most accurate and up-to-date financial statements.
In fact, it is of paramount importance for entrepreneurs not only to learn how to read their financial statements. But to review them on a regular basis. And especially just before they make a financial decision in their business.
The first thing that business owners will learn. Is that this information will help them understand how much money that they have in their business. Not just what is in their bank account at that moment. But how much money they have once all of their payments are made.
An entrepreneur should get into the habit of reviewing their financial statements prior to any financial decision. Such as making an asset purchase, or running payroll. To ensure that they do not make a financial decision that causes their business to run out of money.
If an entrepreneur does not look at their financial statements prior to making a financial decision. They could end up making a decision that would end up causing payments to bounce in their account. And that could cause them to run out of money in their business very easily.
In fact, 29% of all failed entrepreneurs say this is the reason their business failed. Which is the second most common reason why entrepreneurs fail in their business.
Many business owners make the assumption that they will be able to understand what is going on financially in their business. Simply by looking at their bank balance.
And while this will show them exactly how much money they have in their bank account at that moment in time. It will not show them how much money they have left once all of the payments that they have got scheduled clear. Such as checks and electronic fund transfers.
Therefore, to avoid this fate of spending more money than they have. Entrepreneurs should learn how to read their financial statements in their business says Edmonton bookkeeping.
And the more accurate these financial statements are, the more helpful they are going to be. Helping an entrepreneur make the best decision possible.
This is why entrepreneurs should learn how to enter basic financial information into their accounting software says Edmonton bookkeeping. Because they will only get interim financial statements from their bookkeeper once a month. And they should be making financial decisions more often than that.
Especially since most business owners pay their staff biweekly basis. They need updated financial statements at least biweekly. Which is why entrepreneurs should learn how to enter this information themselves.
Therefore it is not just important for an entrepreneur to enter information correctly into their accounting software. But they also need to learn how to read their financial statements. So that they can make the best decision possible.