Preparation of accurate and timely accounts is critical not only for maintaining the compliance status of the Japan business, but also for management purposes.
Key features of our Accounting & Bookkeeping Services include:
- Compliance with Japanese statutory requirements. This includes preparation of the Japanese corporate income tax returns and consumption tax return.
- Custom reporting (usually in English) to foreign management.
- For various specialized purposes including Japan work visa applications and responding to inquiries from parent company auditors.
Typical Flow of our Japan Accounting & Bookkeeping Service
The typical flow of our Japan accounting and bookkeeping service is as follows:
1. Initial Consulting
There are a number of crucial issues that are typically addressed before our accounting service commences.
Examples of these key issues include:
The first step in the accounting / bookkeeping process is to ensure that the Japan business entity’s tax structure is appropriate and well understood. The tax structure will be key in determining what income and expenses are recorded in the Japan books.
This page provides more information about our services with respect to Japan tax structures.
Management Reporting Requirements
While we focus on preparing Japanese statutory accounts, we also prepare reports for use by foreign management. At this stage, our goal is to understand the client’s requirements and agree on a reporting schedule.
Chart of Accounts
A chart of accounts for the Japan entity must be decided.
We attempt to match the chart of accounts to that used in the home jurisdiction. Additional codes can then be added for items such as Japanese consumption tax, Japanese withholding tax, etc.
Interface with Head Office Financial Package
Foreign clients use a range of financial packages in their home jurisdiction. These may include Xero, Cognos, Hyperion, JD Edwards, and SAP.
A decision needs to be made regarding how Japanese accounting data will be integrated into these systems in a manner that best preserves the integrity of the overall system.
Japan Consumption Tax Issues
Japan has a system value added tax ("VAT"), in English commonly referred to as consumption tax. The consumption tax must be well understood and correctly recorded in the accounts of the Japan entity.
The non-deductibility of bonus payments to directors of Japanese companies is a unique feature of the Japanese corporate tax system. Planning opportunities are available if this issue is identified at an early stage.
This article addresses Issues in Structuring Compensation for Directors of Japanese Companies.
2. Monthly Japan Accounting and Bookkeeping Service
Once the above preliminary issues have been clarified, our regular accounting and bookkeeping activities can commence.
The following are some key features of our monthly accounting and bookkeeping service.
We prepare yen denominated statutory accounts for the Japan entity. On a monthly basis, our team carries out routine bookkeeping activities including:
- Recording all payments made and funds received.
- Recording all sales and accounts receivable.
- Recording all purchases and accounts payable.
- Recording prepayments and accruals.
- Recording assets purchased.
- Preparation of bank reconciliation statements.
- Recording consumption tax on taxable purchases / supplies.
- Preparation of a yen based general ledger and trial balance.
- Maintenance of a fixed asset register.
- Journal entries for depreciation and amortization.
Reporting package based on the client’s format
In addition to maintaining yen based statutory accounts, our team creates monthly management reports in English based on each client’s requirement.
Such reporting to the home office typically includes at minimum:
- Profit and loss statement for the Japan entity.
- Balance sheet for the Japan entity.
- Aged financial analysis of debtors and creditors.
3. Annual Services
At year-end, the Japan entity’s accounts are closed and annual financial statements are prepared. These financial statements feed into the corporate tax compliance cycle including:
- Japan Corporate Tax Return. Accounts (yen denominated and in Japanese) must be attached to the Japan corporate tax return.
- Japan consumption tax return.
This is a DRAFT Compliance Calendar for a Japanese Company with a 31 December fiscal year-end.