Japan Accounting & Bookkeeping

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 Japan Accounting & Bookkeeping Service include:

• Compliance with Japanese statutory requirements. Our Japan Accounting and Bookkeeping Service facilitates the preparation of the Japanese corporate income tax return and Japan consumption tax return.
• Custom reporting (usually in English) to foreign management.
• Preparation of more specialized reports for purposes such as 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:

STEP 01 – Initial Consulting

There are a number of crucial issues that need to be addressed before our accounting and bookkeeping service commences.

Examples of these key issues include:

• Determine a Japan Corporate Tax Structure
  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 article discusses the Japan Tax Structures most relevant to foreign companies in Japan.
• Understanding 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 format and schedule.
• Chart of Accounts
  A chart of accounts for the Japan entity must be decided.
  As far as possible, our team attempts to match the Japan chart of accounts to the chart of accounts used in the home jurisdiction. Additional account 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. Japan consumption tax must be well understood and correctly recorded in the accounts of the Japan entity. More information about our Japan Consumption Tax services is available here.
• Non-Deductibility Issues
  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.

STEP 02 – Commence a 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.

(i) Routine Bookkeeping

We prepare Japanese 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 Japanese Yen based general ledger and trial balance.
• Maintenance of a fixed asset register.
• Journal entries for depreciation and amortization.

(ii) Reporting Package Based on the Client’s Format

In addition to maintaining Japanese Yen based statutory accounts, our team creates monthly management reports in English based on each client’s requirements.

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.

STEP 03 – Undertake Annual Services

At financial 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 (Japanese Yen denominated and in Japanese) must be attached to the Japan corporate tax return.
• Japan Consumption Tax Return.