Bookkeeping for a Singapore Company

[smartcard]

I started a small company about an year ago, and the year end financial reporting are due now.

Before the start up of business, I have expenses related to this business, such as buying of Software, Development of my website etc., I need to know how I can record this in my company accounting. These payments were not paid from the company bank account.

I also need to know if there are any standard Excel templates that I can maintain the accounts, Balance Sheet and P&L?

[Strong Eagle]

I started a small company about an year ago, and the year end financial reporting are due now.

Before the start up of business, I have expenses related to this business, such as buying of Software, Development of my website etc., I need to know how I can record this in my company accounting. These payments were not paid from the company bank account.

They are recorded on your books as expenses, just like any other company expense. But instead of coming out of company's cash, you must record a liability, such as loans payable to director/partner in the amount of the total expenditures that you made for the start up.

The advantage of this is when the company starts to make money, you pay your loans off first, so it is not income to you.

I also need to know if there are any standard Excel templates that I can maintain the accounts, Balance Sheet and P&L?

There are. Google to find them. But if you have any transaction volume at all you will want to purchase an accounting package.

[smartcard]

They are recorded on your books as expenses, just like any other company expense. But instead of coming out of company's cash, you must record a liability, such as loans payable to director/partner in the amount of the total expenditures that you made for the start up.

The advantage of this is when the company starts to make money, you pay your loans off first, so it is not income to you.

Many thanks for this input, I don't have receipts or proof of payments for some of these expenses with me now. Is it okay? or I need to show proof like invoices and payment slips etc?

[Strong Eagle]

All businesses must retain expense and income records as proof of business activity. Should you be audited, your claims _could_ be denied.

As an alternate, if you do not have the receipts, you should prepare a list of the dates, times, places, and costs of the items you purchased.

It is unlikely that you will be audited if the amounts are small and inline with general startup costs. But, you never know.

[livingontheedge]

The items you mentioned above appears that they would be asset in nature, capitalised and subsequently depreciated/amortised over their useful lives.

If you have no supporting docs to verify the purchase and cost of the asset, you would atleast need to establish the asset exists and used primarily for the Company's principal activities. The amount can be estimated and substantied via replacement cost method, with subsequent depreciation/amortizaton.

[Strong Eagle]

The items you mentioned above appears that they would be asset in nature, capitalised and subsequently depreciated/amortised over their useful lives.

If you have no supporting docs to verify the purchase and cost of the asset, you would atleast need to establish the asset exists and used primarily for the Company's principal activities. The amount can be estimated and substantied via replacement cost method, with subsequent depreciation/amortizaton.

Maybe... most software and website development costs can be written off in the first year without needing to amortize the expense. PC's amortize over 3 years. Much better to just expense out whenever possible.

[sundaymorningstaple]

PC are depreciated over 1 year in Singapore, not three.

[livingontheedge]

SE - your logic makes sense - it would generally be how the Business Owners view it. But from an accounting and taxation angle, for the purposes of dicussions, expensing it directly will muck up the presentation and disclosures of the FS - the BS, PL and disclosures - and also the Income Tax filing.

[Strong Eagle]

SE - your logic makes sense - it would generally be how the Business Owners view it. But from an accounting and taxation angle, for the purposes of dicussions, expensing it directly will muck up the presentation and disclosures of the FS - the BS, PL and disclosures - and also the Income Tax filing.

According to GAAP, the whole point of the depreciation exercise is to ensure that expenses are matched to revenues. Thus, if you buy a $10,000 widget maker with a life span of 5 years, it is depreciated 20 percent per year so that the cost of the machine is factored into the unit cost of your widgets.

So long as you are not violating depreciation guidelines (for example, the IRS used to require a 3 to 5 year depreciation schedule for PC's, but now allows you to expense), and you properly recorded depreciated amounts against the asset, I don't see where this is confusing. In any event, anyone doing an actual analysis of the company would take a close look at the cash flow statements which pulls out depreciation expense and non operational income.

I depreciated PC's over three years because that's the way it was when I started. But in reality, the cost of the PC versus the actual revenues generated by a project manager was so vastly different that expensing versus depreciating made virtually no difference in reported profit.

[livingontheedge]

PC you can depreciate over 1 year or 3 years, be it for Taxation or Accounting.

[livingontheedge]

SE - unfortunately the practice of expensing asset purchases directly to Profit & Loss within 1 year, even if the net impact to PL is the same, does not comply with GAAP for presentation and disclosure in the FS. Further for assets that are depreciated over 3 to 5 years be it to capitalize to manufacturing costs of inventories or PL directly, if it was expensed in the year of purchase, one would wonder what the accounting entries would be like. Such practice would raise alarm bells even for Tax or Internal Audit.

As for the CF Statement - from taxation or internal audit perspective, it does not hold true that the Cash Flow Statement is relied upon for their computation - of course it may be considered. Non-operating income is not adjusted to the PBT to derive the OCF before WC Changes - only non-cash items are adjusted.

Under GAAP, depreciation/amortization is not computed to match against revenue. It is computed based on the judgement of the economic useful life of the asset, which may or may not be directly determined by revenue, e.g. in the case of straight-line vs volume usage.

[lerxueyi]

Ya I agree. For me i will usually depreciate over 1 year for PC.