It is very for ten to for entrepreneurs who are entering their own bookkeeping information to understand their accounting software according to Edmonton bookkeeping. Simply because many entrepreneurs are making critical errors when it comes to entering information.
One of the most important things that business owners need to keep in mind. Is that their accounting software is not necessarily going to default to the correct locations. Therefore, when they are entering a payment. Or entering in an invoice.
They should question the location, and ensure that they save it to the correct place. A great example of this says Edmonton bookkeeping, our when entrepreneurs are entering tax payments.
The tax payments should go into the applicable tax payable account. Based on what tax is being paid. However, most accounting programs default the tax payments to the tax expense account.
The reason why this is not correct. Is because the tax expense account. Is for the accountant to enter the amount of taxes that an entrepreneur owes. And this calculated once a year, at their corporate year-end.
If an entrepreneur ends up entering tax payments into their tax expense account. Not only will make it look like they owe more taxes than they do. It will not show that they are making tax payments either, which they are.
Therefore, business owners need to be extremely careful. Especially when they are making tax payments. To put the information in the correct account. And not to rely on their accounting software to have the correct location.
In fact, when it comes to tax payable accounts. Business owners need to understand that there is going to be a separate account. For every single tax that they have to pay in their business.
In Alberta, business owners must account for their federal taxes as well as provincial taxes separately. This is different than any other province in Canada. Who pay both provincial and federal tax to Canada revenue agency.
Canada revenue agency then sends the correct provincial tax payment to the provincial government directly. Allowing entrepreneurs to have one tax accountant for both federal and provincial taxes in their business.
However, businesses in Alberta must realize that they have to keep it separate. So that they can account for and pay correctly the federal and provincial taxes to the right tax departments for both.
Although, Edmonton bookkeeping says business owners need to ensure that there is more than just the federal and provincial tax payable account. They also need one for GST, because even though it is a federal tax. It gets calculated and accounted for separately.
And when it comes to payroll taxes, an entrepreneur needs to have a separate tax payable account for each of the payroll taxes. Which means a separate one for the employer and the employee portion of EI as well as CPP.
By understanding how their tax payable accounts work. And how their accounting software will not separate these correctly. Can help business owners have the most accurate finances possible.
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It is very important that entrepreneurs understand how to enter information into their accounting software correctly says Edmonton bookkeeping. This is so that they can have the most accurate financial information possible. That will help them make decisions.
In fact, business owners need to get into the habit early on in their business. Of looking at their financial statements prior to making any financial decisions in their business.
The reason why, is it can help them make those decisions. Without spending money that was earmarked for something else. And understanding how much money they have to utilize.
For example, they should get into the habit of looking at their financial statements that will say how much money they have in their business. As well as how much they owe suppliers and vendors in their business as well.
Therefore, if they want to know if they have enough money in their business to meet payroll. They will be able to make that decision. And ensure that they are avoiding spending more money than they have.
Many business owners believe that they can look at their bank balance in order to figure out if they have enough money to make purchases or financial decisions. However, this theory would end up with many entrepreneurs making financial choices.
For example, the bank balance will show how much money is in the bank account at that moment in time. But it will not show entrepreneurs how much money they have once the checks that they have written have cleared. Or once there electronic fund transfers have gone through.
However looking at their financial statements can show an entrepreneur how much money they have to use. Taking into consideration all of the payments they are expecting. As well as how much they will have leftover once the payments that are pending have gone through.
If they have enough money to make purchases, or to do things like rent payroll. They will be able to do so, confident that it will cause any payments to bounce.
However, Edmonton bookkeeping says that if they do not have enough money to make those decisions purchases or financial decisions. They can use the information to figure out what they need to do to rectify the situation.
Whether those decisions are increasing their marketing or advertising. Perhaps they have to do more sales calls, or start calling people that owe them money.
This is why three important that entrepreneurs learn how to read these financial statements. And then look at them before making any financial decision.
By learning how to enter information into their accounting software. Edmonton bookkeeping says that they can have more accurate and up-to-date financial statements for these decisions. So that they can make the best decision possible for their business.
The earlier that entrepreneurs are able to do this in their business. The earlier the they are going to be able to make the most informed financial decisions in their business that will help them succeed.