It is very important that business owners keep track of all of the different taxes that they are paying says Edmonton bookkeeping. Especially because of the way taxes are calculated.
When entrepreneurs accountant will do their corporate year end. At which point they will figure out how much in taxes the entrepreneur owes the government.
Since an entrepreneur will not find out all of the different taxes that they owe until the year has passed. It is important that entrepreneurs are paying their taxes in instalments throughout the year.
Because they are going to end up paying taxes in advance. Edmonton bookkeeping says is very important that they keep track of all of the taxes that they pay very accurately.
Therefore, when they get to their next corporate year-end. Their accountant will be able to figure out how much in taxes they have paid. And exactly what taxes they have paid.
So that they will be able to more easily understand what taxes are left owing. So that they can enter the correct amount into their tax expense account.
Therefore, business owners need to keep in mind that their tax expense account. Only has their accountant enter anything into that account. And it will only be entered once a year.
As an entrepreneur enters the taxes that they pay, their tax expense account will decrease. Until it reaches zero. And then when an entrepreneur makes tax payments in instalments. The tax expense will show a negative number. Which indicates prepayment of the taxes that an entrepreneur is making.
It is very important that an entrepreneur understands that the tax expense account should only have amounts entered into it once a year and by their accountant. Because this is often where tax payments default and accounting software programs.
Edmonton bookkeeping says is very important that entrepreneurs understand that when they are making a tax payment. That they do not save it where their software has the defaults.
Otherwise, it will show up in their tax expense account. Making it look like they owe more taxes. Instead of paying down the taxes that they currently owe.
They must learn when they are making a tax payment, to put it into the tax payable account. But there are also several different tax payable accounts. And they must know exactly what tax that they are paying. In order to put into the correct tax payable account.
By learning how to do this, entrepreneurs will ensure that they are keeping accurate record of what taxes they are paying, and how much in taxes that they are left owing.
Ideally, Edmonton bookkeeping says that they will pay all of the taxes that they owe. And then start making instalment payments. So that when their accountant calculates the taxes that they owe at their next corporate year-end.
They will have already paid a significant portion of their taxes. And so the have less taxes to have to pay for the next year.
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Learning how to enter tax payments into the accounting software that a business owner has is extremely important according to Edmonton bookkeeping.
Because not only will this help keep their financial statements accurate. It will also ensure that an entrepreneur has kept track of their taxes accurately as well.
The reason why this is so difficult for many entrepreneurs to learn. Is because there are so many different tax payable accounts. For all of the different taxes that an entrepreneur ends up paying in their business.
In most provinces in Canada, business owners do not have to keep their federal and provincial taxes separate. But send both taxes to Canada revenue agency.
Who will then calculate the correct amount of provincial taxes. And then from the amounts that they received from the business owner. Send the correct amount onto the provincial government on their behalf.
However, in Alberta this is not the case. And business owners must keep track of their federal and provincial taxes separately. This means that there will be a tax payable account for federal taxes. And a tax payable account for provincial taxes.
Next, business owners will take into consideration that GST is another tax that will have its own tax payable account. It is very important that an entrepreneur keeps track of this accurately.
So that when their accountant looks at their sales for the previous year. They will be able to easily calculates if an entrepreneur has paid the correct amount of GST or not.
And finally, business owners will need to keep in mind that they will have a payroll account as well. Although, payroll is one instance. Edmonton bookkeeping says there are many different taxes within payroll.
Therefore, not only should there be an income tax, CPP and EI account in their tax payable accounts. But because there is also an employer and an employee portion for CPP and EI. This means that there will be five different accounts for all of the various payroll taxes that an entrepreneur must send in.
Therefore, is very important that business owners understand that there are so many different tax payable accounts. So that when they enter tax payments into their accounting software. They know that they will be doing it accurately.
This can help ensure that business owners are keeping their financial statements not only up-to-date. But as correct as possible. This is very important, because business owners should be using these interim financial statements. In order to make business decisions.
If an entrepreneur is making financial decisions without consulting the interim financial statements. Edmonton bookkeeping says that business owners could potentially be making risky financial decisions. Or making decisions that are ending up with them running out of money.
Since 29% of all entrepreneurs who failed in business in Canada said that the reason why they failed was because they ran out of money. Learning how to read and review the financial statements on a regular basis. Can ensure that business owners are avoiding making these mistakes.