The task of accounting and bookkeeping for a company is huge – and hugely important. It involves not only the maintenance of all day-to-day transactions but also the tracking and justification of all expenses incurred, making sure that they match the revenues generated during any given period. A single accounting mistake could cost your business precious time and resources. Because of its important role in business organizations, it is essential to hire only qualified professionals for your accounting needs.
This article discusses the accounting process and how it differs from bookkeeping and auditing, how accounting helps you meet compliance requirements, and how to look for a trustworthy accounting agency that can help you.
Check out our top picks of the best accounting and bookkeeping firms in Singapore to find out how you can upgrade your accounting processes.
Accounting and bookkeeping help keep businesses organized by tracking the flow of the business’s financial resources. Accounting also allows businesses to identify and track the financial performance of their various departments.
A business’s accounting and bookkeeping system should be systematized and efficient to identify problems early and fix them before they cause serious disruptions. In addition, proper accounting and bookkeeping allows a business to make better decisions about investments and expansion. By understanding a business’s financial situation, managers can make wise decisions about how much to allocate to new projects and how much to save for future needs.
Finally, proper accounting and bookkeeping help a business attract and retain talented employees. By understanding a business’s financial situation, managers can provide employees with accurate information about company finances and their own salaries.
Not all company owners, however, have sufficient accounting knowledge or experience to properly conduct all the business’s accounting tasks. This article discusses accounting processes and standards and how to look for an accounting firm to help you meet your requirements.
Accounting covers the recording, classifying, and summarizing of financial transactions to provide information that is useful in making business decisions. Bookkeeping, meanwhile, is the simpler task of recording financial transactions in a bookkeeping system.
While both areas prioritize keeping accurate records, the main difference between accounting and bookkeeping is that the former has a broader coverage that includes the preparation of financial statements, while the latter is focused on recording minute financial details.
While the two tasks don’t have the same focus and scope, they are interrelated and interdependent. Information from the company’s books is essential in conducting proper accounting, while statements and reports from your accountant guides your bookkeeper.
The bookkeeping process includes recording, storing, and retrieving financial information. Internal bookkeeping is typically under a company's accounting department. There are a few different methods that can be used for the bookkeeping process. The most common method is double-entry bookkeeping. This method records each transaction in two separate accounts to ensure accuracy and prevent errors. Another common method is single-entry bookkeeping services. This method is simpler and only requires recording each transaction in one account and is often used for smaller businesses.
The accounting process includes creating financial reports, maintaining ledgers, and preparing tax returns. It is important for a business to have accurate internal accounting records in order to make sound financial decisions and comply with regulatory requirements.
There are two main methods of accounting: cash-based accounting and accrual-based accounting. In cash accounting, transactions are recorded whenever the business receives cash payment from customers or when it releases cash for expenses or to pay its vendors. It is fairly straightforward and is typically used only by very small, single-proprietor businesses.
In accrual-based accounting, revenue and expenses are recorded on the date of transaction, not when the actual money is sent or received. It is used by all large businesses and is an indispensable method for companies that sell on credit. It makes the creation of financial reports easier as it gives owners a clearer picture of where their business stands in consideration of all ongoing transactions.
Auditing is another term often confused with accounting. There are a few key differences between accounting and auditing:
Any business that wishes to expand needs to cover these three areas. Keeping records of business transactions is crucial for any enterprise, and so is ensuring that those records are accurate. With correct records, your business can easily meet requirements and file taxes without any problems. Business audits are typically done annually; however, it may be required if there is an uncertainty in the records showing what a company owns and what it owes.
The Singapore Financial Reporting Standards (SFRS) was introduced in 2009 to replace the former accounting standards in Singapore, which were based on the International Accounting Standards.
Under the SFRS, companies are required to report a comprehensive set of financial information that is comparable with the data reported by other companies in Singapore and with international standards.
With SRFS, accounting standards in Singapore are mostly based on accrual accounting. This means that financial documents such as business transactions are recognized when they are completed and recorded in the reports for the period in which they occur. This also shows not only transactions that have already been completed but also future obligations and cash that are still to be received.
Why are accounting standards needed in the first place? These standards are important as they help govern practices on how financial transactions are treated or interpreted. The SFRS also help in ascertaining the performance of any business and assessing its financial decisions.
There is a separate SFRS for Small Entities (SE) issued in 2010 for small and medium enterprises to make compliance easier.
The SFRS’ main principles are the following: that companies are assumed to continue operation in the future; that financial statements are faithfully represented, complete, and neutral; that financial statements are based on the accounting policies of prudence; and that financial statements reflect the economic substance of all company transactions.
Accountants and businesses use this as a guide to complete financial statements. These include balance sheet, income statement, change in equity, cash flows, and accounting policies.
Both resident and non-resident companies that do business are taxed on the income generated or remitted to Singapore. Currently, the corporate income tax is at a 17% flat rate. The following are needed to determine how much tax a business owes the government:
Financial statements are prepared for filing in Singapore by the financial statement preparer, usually the accountant. The accountant is responsible for preparing a set of financial statements that are accurate and complete, and present fairly the assets, liabilities, income and expenses of an entity.
The Financial Statements Act requires that all financial statements be prepared in accordance with generally accepted accounting principles (GAAP) or International Financial Reporting Standards (IFRS).
Generating financial statements in Singapore must be undertaken on a prudent basis. This means that the preparer should exercise their professional judgement to decide whether information is relevant to the preparation of accurate and complete financial statements.
Annual General Meeting (AGM)
An AGM of a company’s shareholders is required to be held in Singapore if the company has a share capital or if the company has issued shares that are listed on Singapore Exchange Securities Trading Limited or on any other stock exchange in the country. The AGM is usually called to discuss the company's business and operations, financial position and future prospects.
The AGM is usually held on a date determined by the board of directors. It must be held on or before the date specified in the company's constitution or articles of association. The time and place for holding an AGM must be fixed by resolution at a general meeting.
The AGM must be convened at least once every 12 months and not more than 18 months after the date of the preceding AGM, unless it is convened by a resolution of the Board of Directors.
Filing of Estimated Chargeable Income (ECI)
The ECI is an estimate of the total income that an individual or company can expect to receive in a given year. The ECI is used for tax purposes and is necessary for all individuals who are eligible to file taxes in Singapore. It will be used to calculate the person or business entity's income tax payable for the year of assessment.
The ECI can be filed electronically, through a software or through an agent. It must be filed no later than the date the person or business entity is required to file their Income Tax Return (ITR).
A person or company must also file their ECI by the end of the month following the month in which they receive their last income. For example, if one receives their last income on March 31, then they must file their estimated chargeable income by April 30. If a person or company has not received any income by December 31, then they should file their estimated chargeable income as nil.
The Accounting and Corporate Regulatory Authority (ACRA) and the Inland Revenue Authority of Singapore (IRAS) both require companies to prepare and submit statutory filings. These are the two government agencies that regulate business entities and collect taxes in the country.
For ACRA filings, companies need to submit the annual return filing which must include information such as company name, registration number, principal activities, registered address, list of directors and company secretary, and shareholders information. Attached with these supporting documents are audited financial statements. Small companies, however, are exempted from adding financial statements.
Another requirement by the ACRA is holding an AGM. During the AGM, the company’s financial statements are discussed with the shareholders. It must be held every year, with no longer than 15 months in between meetings. The ACRA issues a Certificate of Compliance for companies that fulfill their requirements.
For the IRAS, companies are required to submit a tax return filing. Companies with an annual revenue of $1 million or higher are also required to submit a report of their estimable taxable income or estimated chargeable income for each financial year. (Companies with annual revenue less than $1 million are exempt from reporting their ECI.) A company must determine their ECI first before filing their income tax return.
Accounting is a profession that focuses on the collection, analysis, interpretation, presentation and communication of information about the financial activities of a business. A professional accountant assists the business owner or managers of companies to understand the accounting system and how this system helps them to manage their business effectively.
They are also responsible for ensuring compliance with relevant laws and regulations and preparing accurate financial statements. In addition, they assist business owner or managers in making informed decisions regarding the use of company funds.
The role of a business accountant includes, but is not limited to, the following:
A responsible company accountant is someone who works for a public accounting firm that upholds high standards and ethical practices. They are accountable for their decisions, findings, and actions. When they do not follow established procedures, they can face disciplinary or even legal actions.
A public accounting firm is comprised of different professionals with their own respective specialties. These include auditors, tax preparers, forensic accountants, management accountants, internal audit managers, and controllers. At some point, any growing company will need services from accounting professionals with these specializations.
Furthermore, the accounting industry is constantly changing and updating laws regarding what is considered ethical and acceptable conduct. Therefore, it is imperative to always stay up-to-date with any changes and regulations regarding business accounting.
When they encounter issues, accountants should be able to recommend solutions and help create better processes. Among the best practices for bookkeeping and accounting are the following:
• Managing Company Resources Properly
For accountants and bookkeepers to provide sound financial information to the business owner, they need to use the right accounting method, track all expenses and revenues, and regularly review the business records. Accountants should also keep themselves informed of any changes in regulations to avoid violations and provide accurate and relevant reports.
• Knowing and Understanding Client Needs
Different industries or types of businesses will have varying standards accounting processes, largely as a result of the specific nature of their field of business. For example, the accounting required of a start-up and a large corporation is vastly different; and a material-based company (such as a wholesaler) will have accounting processes different from a service-based company (such as a law firm). An accountant’s training and experience with different industries are crucial for this reason.
• Keeping Accounts Current
Accounts should be kept current so they are accurate and give a clear picture of how the business is faring. Any error or omissions may result in a tax audit and penalty. Keeping accounts current includes tracking sales, purchases, revenue, expenses, and other records that indicate how much money a business spends or has earned.
Outsourcing accounting functions is a cost-effective solution that allows you to focus on core business activities while your outsourced partner takes care of your books of accounts. Outsourcing accounting functions is especially beneficial for businesses with multiple office locations and a large number of employees.
Outsourcing bookkeeping and accounting services helps get more done with less resources as it does not require any capital expenditure in terms of infrastructure costs or statutory compliance. Furthermore, outsourcing accounting also helps with tax planning and financial reporting matters, which ensures that your company's financial statements are up-to-date, accurate and compliant at all times.
Look for the following traits and qualities in accounting firms:
Accounting firms should have qualified and trained personnel who know how to handle different types of accounts. Accountants should have sufficient information not only about managing business finances but also about what their clients’ financial needs and goals are. They must also possess the right skills needed to make sure their financial statements and analyses are accurate.
You can also hire the service of a chartered financial analyst, who will not only analyze the accuracy of financial statements sent to you, but can also advice you on how to make the best investments for your business. Moreover, the accounting services company you choose must also have the necessary tools to perform bookkeeping tasks correctly. Access to top-of-the-line accounting software is a plus.
Accounting firms need professionalism in order to provide quality services to their clients. This includes having a well-designed office space and observing proper dress codes. An accounting firm should always have a clean and organized premises since this reflects the level of professionalism they practice. Needless to say, every accountant and bookkeeper working in an accounting firm must have professional accreditation.
They must also be able to work with your employees as a team even as an outsourced service provider.
• Honesty and Integrity
An accounting professional must be honest, trustworthy, transparent, respectful, and ethical. If an accountant can be trusted, it is easy to build a good relationship so that both parties can achieve optimal results. These traits also help maintain the good reputation of the accounting firm.
Accounting is a complex and challenging field that is vital for any business. If you're looking for an affordable but highly efficient solution to the management of your books of accounts, then it's time you consider hiring a professional accountant in Singapore who can deliver top quality services at low costs.
Accounting and bookkeeping not only helps a business keep track of all its financial transactions but also gives a clear picture of how the company is performing. Find out how one of our 10 best accounting firms can help your business realize its potential.
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