Even though many entrepreneurs may understand how to enter several things into their accounting software says Edmonton bookkeeping. They might have a lot of questions when it comes to their tax payments and tax accounts.
This is because the way their taxes are accounted for in their accounting program. Is different than on their profit and loss statement, or in their interim financial statements such as their income statement or balance sheet.
In fact, their tax expense and tax payments should not show up on these financial statements. Because they are not an expense of the business. They are corporate expense.
Even taking into GST to account. This is not an expense of the business. Because entrepreneurs will only generate GST that they must pay the government. When they sell their products and services.
And have a markup on their products and services for that tax. Therefore it is not considered a cost of the business. But still needs to be accounted for accurately.
There are a lot of questions that entrepreneurs end up having for their Edmonton bookkeeping company. First when they start learning how to and your basic information into their accounting software.
And then they have even more questions when they have learned a little bit. When they are understanding information on a little bit deeper of a level.
One of the first questions that entrepreneurs have for Edmonton bookkeeping when they are learning how to enter information into their accounting software. Is should they ever see their tax payments in their accounts payable?
While this seems like this is where taxes should be accounted for. It actually is not. Because the tax payments that they are making. Is not an expense of the business.
In fact, entrepreneurs need to understand that despite the fact that some accounting software will default putting tax payments into their accounts payable section. This is not where they belong. They should exist in their own tax payment accountant.
By not relying on their accounting software to have the correct location for payments. Can ensure that an entrepreneur is using their critical thinking skills. To ensure that payments get posted in the correct location. So that they end up with the most accurate financial statements possible.
Another question that entrepreneurs often have when they are figuring out there business finances. Is why do profits not have to exceed CRA payroll, and GST remittances?
This is an important one for entrepreneurs to understand says Edmonton bookkeeping. And many entrepreneurs think that all of the taxes that they have to pay. Means that they have to earn that level of profit. In order to pay them. And while this is true for federal and provincial tax. It is not true for payroll, or GST.
The reason why, is because payroll taxes are taken from the wage that an entrepreneur has already given to their staff. Meaning they do not have to make extra money to pay that tax. This and they have to take it from their staff.
When it comes to GST. Entrepreneurs do not have to make more money. Because the only way they will generate GST. Is if they sell products and services. Which will require an entrepreneur to collect that GST first.
You can cover all your Edmonton Bookkeeping needs here!
There are many different things that entrepreneurs need to keep in mind when they are learning how to enter information into their accounting software according to Edmonton bookkeeping. And they end up having a lot of questions.
If more entrepreneurs started this process, by understanding more of the questions that entrepreneurs had. They would potentially have more knowledge at the beginning of this process.
Ensuring that they made fewer mistakes when they were entering their financial information into their accounting software.
One of the first things that entrepreneurs ask Edmonton bookkeeping when they are starting entering the information into their accounting software. Is what is the difference between tax payable and tax expense accounts?
This is an incredibly important one. Because the two accounts are extremely different. The tax expense account. Is for the entrepreneur to see how much they have been calculated to owe taxes by their accountant.
Their accountant will complete their corporate year-end. And then put the amount of taxes that they owe into their tax expense account. This will be the only time amounts are put into the tax expense account. And should only be done by an accountant.
The tax payable account on the other hand are for entrepreneurs to enter the tax amounts that they have paid. And there will be a different tax payable account for each of the taxes that they must pay.
Each time an entrepreneur enters an amount into their tax payable account. Regardless of what tax they are paying. It should pay down their overall tax expense account. Until they have nothing left owing.
Although, Edmonton bookkeeping suggests that entrepreneurs continue to pay their taxes in instalments. Even after they have paid all of the taxes that they owe.
So that when their accountant calculates the amount of taxes that they owe at the end of their next year. Entrepreneurs will already have paid a portion, minimizing the amount of taxes that they eventually will owe.
The next question that entrepreneurs often have for their Edmonton bookkeeping company is why are tax payments posted to the payable, and not the expense account?
The reason why, is because as entrepreneurs make payments, it should be accounted in the separate tax payable accounts. Since there are many different taxes that an entrepreneur will have to pay throughout the course of their business. All of these will be represented in the tax payable account.
The tax expense account is simply for booking the expense of taxes. And if an entrepreneur enters payments into this account. It will look like they owe more taxes. And that they are not making payments which is not accurate.
The sooner entrepreneurs can understand how to enter information into their accounting software properly. The sooner they can have the most accurate and up-to-date financial statements. As well as keep tabs on the taxes that they are paying.