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The Process Of Tax Reconciliation

     The realm of accounting is one that people who have no affinity for numbers typically stay away from. Obviously, most people fall into that category otherwise the services of accountants would not be in such great demand. Tax reconciliation is an important part of the services provided by trained accountants, and it is an essential process to ensure proper book-keeping. Reconciliation, in general accounting terms, is to match the various entries in the account books such that the amount of money recorded leaving an account is equal to the amount of money actually spent. If, for example, money were drawn from an account to purchase low-valuation energy assets, then that amount would need to be reconciled with the actual monetary cost of those assets.

Reconciliation is important because it is a key principle of accounting and business that you must be able to account for all the money that enters or leaves a company. This ensures that you know where all of the money that belongs to the company is at all times, and is designed to prevent the managers or other employees of the company from misusing funds or redirecting it for their own personal benefit.

Reconciliation is also a necessary precursor to important financial processes such as the consolidation of balance sheets. Balance sheets are statements that contain all of the essential financial information regarding a company, such as the amount of money that it earned, how much it spent and on what, and how much it paid its employees, to name but a few things. The reconciliation process ensures that the figures available from the accounts are accurate. This is essential because reporting inaccurate figures could cause a company to run afoul of the law and incur severe penalties.

The part of the process that the government is most interested in, however, is the calculation of taxes. Each year, every company is required to pay taxes based on the calculation of certain requirements. These calculations are made based on figures provided by the company as verified by its auditors and accountants. Without proper figures, the company would not be paying the right amount of taxes. This is dangerous because there are laws in place that penalize improper tax reporting very heavily. Tax reconciliation allows for a check of the figures based on which tax will be calculated, thereby providing the preliminary check of accuracy.

One way to carry out reconciliation is through the use of software. Developers have created software that, among other things, assist users with reconciliation. This sort of software is appropriate for smaller businesses that do not have the resources to keep accountants on their staff or to hire them each year. Such software is inadequate to deal with the needs of larger companies, however, and even smaller companies would do well to hire accountants to verify their accountants at the end of each financial year.

For larger companies, however, tax reconciliation is something that must be left up to the accountants. If, for example, the money withdrawn from an account to purchase low-valuation energy assets cannot be fully accounted for by the cost of the assets, then the accountants will be able to track that money down and tell you where it was actually spent.

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Asset Reconciliation : At the end of the financial year, you will need tax reconciliation services to reconcile the accounting entries where you have drawn money from an account to purchase low- Valuation Energy assets or any other form of asset, and there is no one better suited to the task than RHAS.

Posted on 2013-06-28, By: *

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