Bookkeeping is the art of recording each business transaction in a systematic manner, which enables the user to know the actual state of any transaction in a fast and efficient way. A bookkeeper in Singapore needs to know the relevant rules for categorizing transactions as per the provisions given in the Singapore Financial Reporting Standards (SFRS). An understanding of Singapore tax laws is essential. Singapore Company Incorporation elaborates on what it takes to be an effective bookkeeper in Singapore.
Though initially thought of as a complex process, bookkeeping is actually a simple task if one takes a systematic approach. A professional bookkeeper essentially records every single transaction, regardless of its size, and closely complies with the local accounting rules.
Know SFRS and IRAS
In Singapore, knowledge of SFRS is of utmost importance. Whether to apply a straight-line depreciation method or accelerated depreciation method for a particular statement (accounting or tax) should be clearly known to the bookkeeper. Other items such as inventory valuation, deferred taxes and real estate valuation should be treated as per the specific provision laid out by the SFRS.
An SFRS is essentially a slightly different version of International Financial Reporting standards (IFRS). Hence knowledge of SFRS would empower a bookkeeper to work in other regions where IFRS is employed as well.
Similarly knowledge of Inland Revenue Authority of Singapore (IRAS) regulations is crucial to claim tax credit, where applicable. For instance, firms in Singapore are eligible for the Productivity and Innovation Credit (PIC). A good bookkeeper would categorize the items, from which he can claim PIC, under ‘PIC Fixed Assets’.
Know the audit process
Further, a bookkeeper must know the basics of the auditing process in Singapore. For instance, companies with less than S$5million in annual revenue, has 20 or less shareholders, and no corporate shareholder are exempted from having its accounts audited. Those exempted from audit may submit unaudited financial statements, commonly known as director’s reports. (Check if your company qualifies for audit exemption in this exclusive infographic.)
Remember, bookkeeping is not analysing or producing management and financial reports. It’s also different from filing taxes with the Inland Revenue Authority of Singapore (IRAS) or filing annual reports with the Accounting and Corporate Regulatory Authority (ACRA).
Finance managers often find it difficult to reason out the discrepancies between actual and recorded expenses, more so when the break-up of all expenses are not recorded properly. This then becomes a nightmare for the manager and eventually for the bookkeeper.
Thus, it becomes imperative for a bookkeeper to follow a systematic approach throughout the bookkeeping process. At times, it may not be possible for a bookkeeper to record a transaction in a detailed manner. However, he has to take utmost efforts to maintain the records in close accordance with SFRS.
The key is to record everything.
For instance, even though a small expense of S$50 for a client lunch cannot be verified against a bill, such transactions should also be recorded instead of dropping them completely from the book of accounts. Following this process diligently helps a bookkeeper to come up with accurate accounting and management reports as and when required.
Know where to place every item in the books
Another point of note for a bookkeeper is the exact know-how regarding the treatment of profits in the books as specified by the SFRS and IRAS.
Often the same items from financial statements are treated differently for different purposes. For instance, a marketing manager can treat profits differently for accounting and taxation purposes. A business owner can claim expenses incurred on his car as accounting expenses, which, however, is not allowed to appear on the tax statement.
Thus, a prerequisite for a bookkeeper is to know where to put which item in the accounting books.
Know payables and receivables accurately
Large corporate firms have to go through a stringent auditing process to ensure ethics and compliance. However, smaller firms have the flexibility to bypass the auditing process, which can be leveraged to maintain accuracy while preparing financial statements.
Thus, a bookkeeper must ensure that all bank statements are consistent with the business transactions entered in the accounting software on a monthly basis. If there’s any discrepancy, a comprehensive bank reconciliation statement should be produced to give an idea of the cash and bank balances.
Similarly, sales invoices should be checked thoroughly against the software records. An income record lacking a sales invoice should be correctly treated as “account receivable”. Similarly an unpaid bill or one that needs to be paid in the future should be treated as “account payable”.
Finally, an efficient bookkeeper must also use the latest accounting applications based on cloud computing, which have made it possible to record business transactions in real-time. This real-time bookkeeping allows a firm to better manage its production and finances. Further, as the software is cloud-based, the firm saves money on down-time and pays as per the actual usage.