ACCOUNTING
ACCOUNTING
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Accounting is different from bookkeeping.
Bookkeeping is concerned with recording, data entry and the administration of keeping the records. The person who does the bookkeeping would require basic knowledge of the principles of accounting especially the functions of double entries, accounting rules and tax rules and how to apply them specific to certain simple businesses.
However, with modern-day accounting systems, especially those AI-driven systems, the double entries are usually taken care of by the system. The bookkeeper would rely on the accounting system to generate the profit and loss, balance sheet and trial balance of the company.
The Accountant’s role is to ensure that the accounting system is using the right accounting standards (given powers by the companies act and recognised by the income tax act) to apply to the Company’s business.
For e.g. a company investments in properties for her own use or for rental income purposes will be treated under different accounting standards (FRS 16 or FRS 40). A company that sells goods with warranty and without warranty would have to apply FRS 115, and if they have inventories, how to deal with them in FRS 2 or 41 etc.
The Accountant would have to also consider how the accounting entries would affect Income tax rules. For e.g. Director fees can be approved at the AGM and accrued in the accounts. However, if they are not paid within a year, the Income tax rules will disallow the deduction of such fees.
The Accountant has to consider GST rules. For e.g. if Trade payables are not paid within 1 year, the trade payables will continue to be outstanding in the accounts, but the GST input tax claimed has to be returned back to IRAS.
The FRS standard demands that there are certain disclosures (for e.g. related party transactions) in the notes to the accounts. A cash flow statement (FRS 7) is mandatory. However, the management accounts and almost all the accounting system does not have such a function.
Hence, accounting is usually for reporting (internal and external stakeholders) and bookkeeping is usually for recording purposes only.
Usual accounting needs of small businesses (SMEs):
- Unaudited FRS compilation report for ACRA and IRAS reporting
- Consolidated report for non-official subsidiaries
- Business valuation statements
- Advisory on treatment on certain accounting transactions.
- Cash flow budgeting
- Business forecasting
We can do A LOT more than the above-mentioned. Contact us today!