When entrepreneurs are entering the tax payments they have made into their accounting software, Edmonton bookkeeping says it is important to do properly. Not only so that they can ensure that they are paying the taxes that they should.
But by entering this information into their accounting software properly. Ensures that the information on their financial statements is as accurate as possible as well.
It is important that their financial statements are as accurate and up-to-date as possible. Because these the documents that entrepreneurs should be using on a regular basis. In order to make guided and informed financial decisions in their business.
For example, a business owner should be looking at the statements in order to decide if they have enough money to run payroll. And if not, they should be able to make a decision on if they should engage in collection calls. Or increase their marketing or sales activities to bring more money into their business.
Or they can be using the information in order to figure out if they need to minimize expenses, or increase the number of transactions in order to generate more money for their business.
However, Edmonton bookkeeping says it starts with ensuring accuracy when entering information into their accounting software. And one way to do this, is for entrepreneurs to understand where the taxes that they pay should be accounted for.
One mistake that entrepreneurs often make. It is thinking that tax payments should get reflected on their profit and loss statement.
While there profit and loss statement is for entrepreneurs to entering all of the profit that they have made by selling products and services to their business. And how much it costs them to generate those sales.
Their taxes should not be reflective on this Provident loss statement at all says Edmonton bookkeeping. Because it is not an expense of the business. But is an expense of the corporation instead.
Therefore, business owners should understand exactly where their tax payments should be entered. To avoid entering them incorrectly. And then making it look like they had us profit than they actually did in their business.
It is also very important to note that when they are entering tax payments. That where there accounting software will want to default that payment. Is not aware it should and up getting entered into.
Chances are very high that their accounting program is going to default tax payments into the tax expense account. This might sound accurate initially.
However the tax expense account is where their accountant will put much taxes on entrepreneur goes for the previous year into their accounting software. Not only should information be entered by their accountant only into this section. But it is for the taxes that they owe. And not payments that they make.
They should know that when their accounting software is trying to put the information in one spot. That they understand that it should be put in a different location. So that they can end up protecting the accuracy of the financial information in their software program.
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When entrepreneurs are new in their business, and are learning how to enter information into their accounting program says Edmonton bookkeeping. They need to also learn how to enter tax payments.
Business owners should be making tax payments on a regular basis. And for the first half of the year, it should be paying off the taxes that they owed for the previous year. But as they pay that balance down to zero.
They should continue making tax payment instalments. So that when their current year comes to an end. They will have made several tax instalment payments. So that they will not owe quite so much in the next year.
However, if business owners have made mistakes on where they paid taxes. Either by putting them in the wrong account. Or co-mingling more than one type of tax together.
They will end up not understanding how much they have paid in taxes. And what taxes they have paid. And their accountant as well as their Edmonton bookkeeping company. May end up spending a lot of extra time figuring it out.
Or they may never figure out exactly what taxes an entrepreneur has paid in what amounts. In this could end up with an entrepreneur overpaying some taxes and underpaying others. And being hit with penalties from Canada revenue agency for not paying their taxes properly.
One of the first things that entrepreneurs need to keep in mind, is that there is going to be as many different tax payable accounts. As there are taxes that they owe.
For example, an entrepreneur must keep in mind especially in Alberta. That they are going to have a federal tax payable account. As well as a provincial tax payable account. They must send their federal taxes to Canada revenue agency. And their provincial taxes to the provincial tax department.
They also will take into consideration that there will be a GST tax payable account. That when done properly. An accountant will build a look at how much money they have made in a year says Edmonton bookkeeping. And the amount of GST they paid in their tax payable account. To calculate if they have paid enough.
And then they are going to be the payroll taxes. And each tax that they must pay will belong in its own separate tax payable account. Many entrepreneurs make the wrong assumption that payroll taxes as a group can exist in the tax payable account.
Since it cannot, entrepreneurs need to take into consideration that there is going to be one account for the employer portion of CPP as well as the employee portion of CPP. And the employer portion of the EI. As well as the employee portion of EI.
And once an entrepreneur has taken into account all of these different tax payable accounts. It should be a lot easier to keep track of all the taxes that they pay. And ensure that they are entering them into the right account when they do their accounting.