When entrepreneurs are learning how to enter information into their accounting software says Edmonton bookkeeping. There are many things that they can learn right away, that can help ensure the information they are entering is as accurate as possible.
This is extremely important, because not only should entrepreneurs be using their financial statements. In order to make important financial decisions in their business.
But if these financial statements are not accurate, the decisions that they make may not be in the best interest of their business. Or they might make mistakes, because they think the financial state of their business is something that it is not.
The reason why business owners should be using their financial statements in order to make financial decisions. Is because these documents will tell them what the state of their business is.
Not just how much money they have in their business. But what their debt servicing is. So that they can see if they have the money to pay bills or run payroll. Or even if they have the money to purchase assets or even pay themselves.
Since the second most common reason why entrepreneurs fail in Canada. Is because they run out of money in their business. Making it that important for entrepreneurs to make more informed financial decisions in their business.
In fact, Edmonton bookkeeping says one mistake that new entrepreneurs often make. Is looking at their bank balance in order to make those important financial decisions. However, that is an extremely risky move.
Reason why business owners should not depend on their bank balance in order to make financial decisions. Is because their bank balance might show them exactly how much money they have in their business at that moment.
But it will take into consideration any payments that are coming out. Such as a chronic fund transfers, or checks that they have written, but have not yet cleared the account.
What their bank balance also will not show them, is how much money they owe to compared to how much money they have. Therefore, if entrepreneurs just look at their bank account in order to see if they can make payments.
They could very well and up making a financial decision that would have them running out of money in their business. And that mistake is often enough because an entrepreneur to go out of business.
Therefore, learning how to enter information into their accounting software accurately is very important says Edmonton bookkeeping. And something that business owners should learn how to do early on in their business.
And when entrepreneur is entering their tax payments into their accounting software. The first thing that they should keep in mind is that where their accounting software will default this payment to go. Is the wrong place.
The software will default the tax payment to go into their tax expense account and not their tax payable account. Which will ultimately make it look like they owe more taxes. And that they have not been paying those taxes off.
By learning exactly where their payment needs to be posted in their accounting software. Can help ensure that they are keeping track of the taxes that they pay accurately. And ensuring the accuracy of their financial statements.
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Despite the fact that there are many things that entrepreneurs need to learn right away when they open up their business says Edmonton bookkeeping. Learning how to enter payments into their accounting software is important. So that they can end up with accurate financial statements.
As they will be using these financial statements to make informed decisions in their business. The more accurate these financial statements are, the better.
In addition to that, when entrepreneurs pay the taxes that they owe to the government. Keeping accurate record of this. Can help them understand how much in taxes they have paid.
And how much in taxes they have left to pay. And this is extremely important, because taxes are calculated once a year by their accountant.
Not only are they calculated once a year. But the taxes that their accountant calculates for them. Or for the previous year. Therefore, a business owner should be making tax payments throughout the year.
As they pay last year’s taxes off, the tax expense account will decrease until it reaches a balance of zero. And at this point, business owners should continue paying taxes in instalments.
The reason why is that even though they have complete their taxes off already. Is the taxes that they paid was for last year and if they continue to pay taxes in instalments. They will be paying this year’s taxes.
So that when their accountant and Edmonton bookkeeping company calculates the taxes that they owe. They will have an accurate record of what taxes they have already paid. And so they will have less taxes owing in the next year.
However, it is not just important for entrepreneurs to enter all the taxes that they paid into one account. Each tax that they pay belongs in its own separate account. So that their Edmonton bookkeeping company and accountant will know exactly what taxes they have paid.
In Alberta, businesses must pay for their federal and provincial taxes separately. So these will be two different tax payable accounts. But also, GST will be a separate account as well. And very important that entrepreneurs are keeping track of this amount separately.
It will also have a payroll tax payable account. But it is also important that entrepreneurs are keeping note of all of the different payroll taxes separately as well.
This is not just income tax, CPP and EI. But since there is an employer portion and an employee portion of both CPP and EI. And entrepreneurs should keep those amounts separately as well.
By ensuring that they are keeping all of taxes that they owe separate. Can help them account for all the different taxes that they have paid. So that their accountant can figure out what they have left owing.