Although many business owners start doing some of their own bookkeeping in order to save money, and keep better track of their finances says Edmonton bookkeeping. However, there are several things that they should keep in mind. To ensure that they do this as accurately as possible.
It is very important that entrepreneurs have the most accurate financial statements possible. Because these the documents they are going to use in order to make financial decisions in their business. And the more accurate they are, the better decisions they will be able to make.
One mistake that entrepreneurs make regularly. Is not understanding the difference between tax payable account and tax expense account. What also increases the amount of errors that entrepreneurs make. Is often, their accounting software want to default their tax payments to the accounts payable section.
Therefore, entrepreneurs need to understand the difference between a tax payable and tax expense account. As well as how many tax payable accounts there are, so they can post the correct tax payments to the correct account.
The first thing that entrepreneurs need to understand is that a tax expense account. Is where their accountant is going to enter the calculation of the taxes that an entrepreneur owes. Which is entered once a year, when they complete the businesses corporate year-end.
Even though the taxes are calculated once a year says Edmonton bookkeeping. It is important that an entrepreneur makes tax payments in instalments. Even if they have paid that tax expense account completely.
The reason why they should continue making tax payments in instalments. Is even if their tax expense account is zero. Those were the previous years taxes. And continued to make payments in instalments. Entrepreneurs are making the payments for this years taxes.
And once they have completed their corporate year. If they have been making payments in instalments. They will already have paid a lot of the taxes that they will end up owing by the end of the year.
The tax payable account on the other hand says Edmonton bookkeeping. Is where the entrepreneur enters all of the amounts of taxes that they have paid.
There are several ways that business owners can make mistakes. And the first one is the accounting software often defaults tax payments into the accounts payable section. Which is absolutely incorrect.
And business owners need to know not only to stop it from appearing in this account. But what accounts it should be posted in. And while there is a tax payable account.
There are several different accounts that should be set up. And so in entrepreneur needs to know what tax they are paying. So that they can post it to the correct tax payable account.
By keeping these things separate. Business owners will be able to ensure that not only are there tax payments not entered into their accounts will section.
But that will keep their financial statements or correct. That will help them read to their financial statements, and understand what is going on financially in their business.
We can offer relief to those doing Edmonton Bookkeeping
Learning how to enter information into their accounting software is extremely important says Edmonton bookkeeping. And the sooner a business owner can do this in their business. The sooner they are going to have more accurate as well as more up-to-date financial statements in their business.
Since the recommendation is for business owners to look at lease financial statements prior to making any financial decisions. Including paying bills, making purchases and especially running payroll. This means business owners should be pulling their financial statements every two weeks at minimum.
If they are updating their finances into their accounting software regularly. They have a better chance of having the most accurate and up-to-date financial statements. When they pull those statements in order to make those financial decisions.
However, it is extremely important that entrepreneurs understand how to do this as accurately as possible. Because if they end up making errors in their bookkeeping.
Their financial statements will not be accurate. And they might end up making the wrong financial decision based on the information.
One of the first things that Edmonton bookkeeping says business owners need to understand, is where to account for tax payments. Because there are several different accounts for this purpose.
Especially if entrepreneurs are coming to Alberta from other provinces. They might end up making critical errors. Because of the way federal and provincial taxes are calculated in Alberta. That is different than all other provinces.
In Alberta, Edmonton bookkeeping says entrepreneurs must keep track of, and pay the provincial taxes separately. From the federal taxes that they pay Canada revenue agency.
This is different than all of the other provinces in Canada. Because the rest of the provinces must pay all of their federal and provincial taxes to Canada revenue agency.
Who will calculate the taxes that the provincial government should get. And then send the payments to the provincial government on the entrepreneurs behalf.
Understanding this, can help ensure that business owners are keeping track of their federal and provincial taxes correctly throughout the year. By putting them in the correct tax payable account.
The next thing that entrepreneurs need to keep in mind. Is that there are more than just to tax payable accounts. One federal and one provincial. Because there are several different federal taxes that entrepreneurs must also pay says Edmonton bookkeeping.
There is the GST that they need to keep calculated separately. As well as all of the payroll taxes that they must pay. While many people might think that this results in one payroll account. This is not true.
Not only are their payroll tax accounts for income tax, CPP and EI. Since there is also the employer portion of CPP, and the employer portion of EI. This will result in having five different payroll tax accounts. In addition to GST, and then federal and then provincial tax payable accounts.
By understanding the difference between a tax payable account in the tax expense account. And all the various tax payable accounts that they should have. Can help ensure that entrepreneurs are keeping accurate track of their tax payments.