These financial and tax knowledge are must-know for business owners

2024-03-30

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At the initial stage of a company's establishment, bosses often prioritize business operations, thereby neglecting issues and potential risks related to financial and tax management. Many bosses believe that as long as the company is well-managed, financial matters can be left to accountants, and knowledge of tax issues is not given enough importance. Little do they know that if financial and tax issues are not handled properly, they can cause incalculable losses to the company. Therefore, it is essential for bosses to understand some basic financial and tax knowledge, and the following five financial and tax points are a must-know for business owners.

1. Financial Statements: Financial statements mainly include the balance sheet, income statement, and cash flow statement. The balance sheet reflects the assets and liabilities of a company at a certain point in time and is the foundation of business operations. The purpose of the balance sheet is to help users of financial reports evaluate the company's asset quality, short-term debt-paying ability, long-term debt-paying ability, and profit distribution by accurately reflecting the quantity and structure of the company's assets, liabilities, and owner's equity. The income statement reflects the current stage of the company's revenue, expenses, and the amount of profit and loss that should be recorded in the current period, which is the face of the company. The purpose of preparing the income statement is to accurately reflect the company's revenue amount and structure, as well as other comprehensive income, to analyze and evaluate the company's profitability, composition, and quality.

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The cash flow statement reflects the sources and uses of a company's cash flow, which is divided into three parts: operating activities, investing activities, and financing activities. The cash flow statement can be used to analyze whether the company has enough cash to pay expenses in the short term. The purpose of preparing the cash flow statement is to help users of financial reports evaluate the company's cash flow and capital turnover by accurately reflecting the inflow and outflow of cash from various activities. In summary, understanding financial statements is fundamental, and it is not enough to just look at the numbers; one must also look beyond the numbers.

2. Understanding Basic Tax Types: Currently, there are 18 types of taxes in China, but businesses do not need to pay all taxes at once. For businesses, the taxes involved generally include Value-Added Tax (VAT), corporate income tax, surtaxes, personal income tax, stamp duty, etc. In particular, corporate income tax has an annual "final settlement and payment" process at the end of May, which is an important process for companies to calculate whether they made a profit in the previous year and is also a key focus of tax bureau audits. Regarding tax reporting, some bosses may think that the company only needs to report when there is business, and there is no need to report when there is no business or when it does not reach the threshold. However, this is incorrect. As a business, it is mandatory to report taxes. If a company fails to report, the tax authority can impose a fine of up to 10,000 yuan according to the tax collection and administration law. Here, the editor would like to remind all businesses that regardless of whether the company is profitable, at a loss, tax-exempt, or for other reasons, as long as it has not been deregistered, it must report monthly.

3. Understanding Tax Red Lines: It is essential for business owners to be aware of the red lines in taxation, such as issuing false invoices, buying and selling invoices, defrauding export tax rebates, concealing income, and inflating costs. All of these are behaviors that endanger the safety of the enterprise. Here, the editor would like to remind everyone again that they must not touch these red lines, otherwise, it will bring a lot of trouble to their own business.

4. Understanding Types of Invoices: Apart from special invoices for freight transportation and unified invoices for motor vehicle sales, if a company is a general VAT taxpayer, it should use special VAT invoices and general VAT invoices. If it is a small-scale taxpayer, it should use general VAT invoices (upgraded version taxpayers), general machine-printed invoices, and handwritten invoices, etc. Of course, as a boss, there is no need to know the details; just use the types and quantities of invoices approved in the invoice purchase book. One point to note here is that some bosses buy fake invoices to evade taxes. If this behavior is discovered by the tax authorities, it is not just a matter of paying back taxes. If the quantity held or the amount of invoices reaches a certain threshold, they will be transferred to the public security organs for criminal responsibility. Therefore, do not harbor any illusory hopes.

5. Understanding VAT Regulations:For many newly established businesses subject to Value-Added Tax (VAT) or those that have recently implemented the "business tax to VAT" reform, for general taxpayers, it is possible to deduct the certified input VAT for the current month. However, for taxpayers in the guidance period, they must wait for the comparison results before they can declare and deduct the input VAT. Accountants should declare and deduct the input VAT within the time specified on the "Audit Results Notification". If the accountant forgets to deduct, according to the provisions of tax law, except for special reasons, certified invoices that are not declared and deducted within the prescribed time will also not be allowed to deduct, directly leading to the enterprise paying more taxes, which brings irreparable losses to the enterprise.

In conclusion, there is still much to learn about finance and taxation. Finance and taxation are not just about bookkeeping, tax payment, and money management; more importantly, they are a method and means of management. The boss, as the soul of the enterprise's development, should understand the basic knowledge of finance. Because knowledge of finance and taxation can determine how far your enterprise can go.