Learning how to enter information into their accounting software is incredibly important for business owners says Edmonton bookkeeping. Because this will help them have the most accurate financial statements.
The reason why it is important to have accurate financial statements throughout the month. Is because business owners should be using this information in order to make informed financial decisions.
And while there Edmonton bookkeeping company may be providing them with financial statements every month or every six weeks. Entrepreneurs should be looking at the statements prior to making any financial decisions.
Therefore, the more accurate these financial statements can be. Will help entrepreneurs make the most informed decisions, financially for their business.
Whether an entrepreneur wants to know if they have enough money to run payroll, or pay bills. Or even if they are purchasing an asset, or paying themselves. By looking at accurate financial statements.
Can help them understand if they have enough money to make the decision. And if not, come up with a plan on what they can do to ensure that they can bring the money they need in make that decision.
For example, if an entrepreneur does not have enough money to run payroll. They might want to engage in some collection calls. So that they can bring money that they are owed into the business. So that they can pay their staff.
Or, if an entrepreneur does not have enough money to purchase and assets. They may make plans to engage in some revenue-generating activities. Such as increase their marketing, or do more sales calls. So that they can increase the revenue.
However, what an entrepreneur needs to do to ensure that they have the most accurate financial statements. Is enter information into their accounting software correctly says Edmonton bookkeeping.
One mistake that entrepreneurs make on a regular basis. Is when it comes to entering in the tax payments that they have made.
One of the first mistakes that they make, is entering the taxes to where their accounting software defaults. Most accounting programs default tax payments to the business is payable account. Which not only is not accurate, but it can end up making their financial statements even more incorrect.
The reason why, is because the payable account is for entrepreneurs to account for business payments. And taxes are a corporate payment. So it should not show up on their businesses payable account at all.
The second reason why entrepreneurs often make a mistake when it comes to entering their tax payments. Is because there are multiple tax payable accounts. And if they are not aware of all of tax payable accounts that they have. They could end up comingling tax payments.
Not only will this end up with accurate financial statements. But it will also end up with an entrepreneur not knowing how much of what taxes they have paid, and which taxes are left owing.
Therefore, it is one of the most important things that entrepreneurs learn how to do when they first are learning their business accounting. So that they do not end up making inaccurate financial statements. Or over or under paying taxes that they owe.
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When entrepreneurs are starting their business, they often want to do some of the entries into their accounting software themselves says Edmonton bookkeeping. And this is a great way to ensure they have the most up-to-date financial statements.
However, if entrepreneurs are not entering this information correctly. They could end up not only with inaccurate financial statements. That will impact their ability to make informed financial decisions.
But also, if they are not putting their tax payments into the right account. They might not know how much taxes they owe. If they have overpaid, or underpaid.
It will take more time for their Edmonton bookkeeping company to do their interim financial statements. And it will take longer for their accountant to calculate the taxes at the end of their year.
Business owners need to understand that when they are putting the tax payments into their accounting software. That there will be several different tax payable accounts. The reason why, is because there so many different tax payments that they need to make.
Especially if entrepreneurs are coming from another province where they owned business. They need to understand their going to be a federal as well as provincial tax payable account.
In no other province in Canada, must a business owner pay federal and provincial tax separately. Because all other provinces simply pay their provincial and federal taxes to Canada revenue agency. Who will send the correct provincial taxes to the provincial government directly.
If entrepreneurs know ahead of time that provincial and federal taxes must be kept separately. Then they will be able to make that distinction when they are entering taxes into their tax payable account and their accounting software.
The next thing that entrepreneurs need to know, is that there is going to be as separate GST tax accountant. The reason why, is because even though GST is a federal tax. It is calculated differently than the corporate federal taxes that they owe.
The next thing that an entrepreneur needs to be aware of, is that there are going to be several different tax payable accounts for their payroll taxes. Many business owners might make the assumption that all of the various payroll taxes get accounted for in one account.
However, there is not just CPP and EI as payroll taxes. But the employer and employee portion of each as well. Therefore, it is very important that an entrepreneur puts the correct payroll tax that they have paid into the correct account.
By putting all of the correct tax amounts that an entrepreneur has paid. Into the right accounts. Can help ensure that an entrepreneur knows exactly what taxes they have paid. And how much more they owe.
However, ideally, a business owner will pay all the taxes that they owe down to zero. Because all of the taxes in their tax expense account will represent last year’s taxes says Edmonton bookkeeping.
So by paying them off before the end of their current year. Means that they can continue to make tax payments in instalments. So that they will be able to pay the current years taxes. So that they will owe less when their accountant calculates the taxes that they owe at the end of their current year.