Bookkeeping or Financial Report – Based on KUP Law Article 28 Paragraph 1, Corporate Taxpayers in Indonesia are obliged to conduct bookkeeping. Bookkeeping is a recording process carried out regularly by collecting financial data and information covering assets, liabilities, capital, income, costs, as well as the amount of acquisition price and delivery of goods/services. The collected data will be finalised by preparing a financial statement containing a balance sheet and income statement for a period of one year.
Bookkeeping has a very important role in taxation. Bookkeeping or tax financial statements are needed to manage a business while fulfilling the company’s tax obligations. Bookkeeping can make it easier for taxpayers to fulfil tax rights and obligations, such as making it easier to submit tax returns. Bookkeeping function from the tax perspective:
- Recording of Income and Expenses:
Bookkeeping records in detail the income and expenses of the company. This is important for calculating taxable profit, which is the basis of income tax calculation.
- Separation of Expenses:
Bookkeeping helps in separation of expenses that can be deducted as business expenses from those that cannot be deducted. This includes separation between expenses that can be taken into account as tax deductible and those that cannot.
- Preparation of Financial Statements:
The financial statements generated from bookkeeping, such as the income statement and balance sheet, provide a clear picture of the company’s financial condition. These reports are required for tax reporting.
- Income Tax Preparation:
Bookkeeping provides the data needed to calculate the company’s income tax. With accurate bookkeeping, the tax preparation process can be done more efficiently and with a lower risk of errors.
- Monitoring of Taxes Paid:
Bookkeeping allows companies to monitor and help in accuracy in paying and reporting taxes so as to avoid tax problems.
- Efficient Tax Management:
With the right information from bookkeeping, companies can plan and manage taxes more efficiently. This includes tax planning strategies to optimise profits and reduce tax burden.
When a business entity does not perform bookkeeping properly, the company may face difficulties in fulfilling its tax obligations. This can lead to late tax payments, fines, and potential legal issues.
Source by Accounting & Tax Team
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