What are Annual Accounts?Comments Off on What are Annual Accounts?
What exactly are “annual accounts”? What information must they contain? Are there rules for the preparation of annual accounts? These and similar questions are often asked by companies, especially when they are new to the market.
With annual accounts, also referred to as the annual financial statements, the bookkeeping closes the respective business year. The results show how the company is doing financially, and whether the company was successful in this financial year. Also, the composition of business assets is presented in the annual financial statements. Accounting for the past year is not possible without the financial statements.
The contents of the annual financial statements include the reconciled accounts, the compilation of supporting documents, as well as the audit, confirmation, and publication. For the manager, the annual financial statements are a tool for determining the business’ financial position, the profits/losses and the cash flow over the year. During the financial year, information is available to him by the current accounting. A more detailed picture, however, requires the annual financial statements including the inventories.
Companies must keep books and follow accounting procedures as specified in the Civil and Commercial Code, the Revenue Code, and the Accounts Act. Documents may be prepared in any language, provided that a Thai translation is attached. All accounting entries should be written in ink, typewritten, or printed. All companies, partnerships, branches of foreign companies, and representative offices are required to prepare financial statements for each accounting period. The financial statements must be audited by and subjected to the opinion of a certified auditor, except for the financial statement of a registered partnership established under Thai law, whose total capital, assets, and income is not more than that prescribed in Ministerial Regulations.
The performance record is to be certified by the company’s auditor, signed by the director, approved by shareholders, and filed with the Commercial Registration Department of the MOC and with the Revenue Department of the Ministry of Finance (MOF). For a private limited company, the director is responsible for arranging the annual meeting of shareholders to approve the company’s audited financial statement within four months of the end of the fiscal year, and filing the audited statement and supporting documents, including a list of shareholders on the date of the meeting, to the Registrar no later than one month after the date of the shareholder meeting.
For a foreign company, i.e., branch office, representative office or regional office, and excluding joint ventures, the manager of the office must submit a copy of the financial statement to the Registrar no later than 150 days after the end of the fiscal year. Approval of the shareholder meeting is not required.
For a public limited company, the director is responsible for arranging the annual meeting of shareholders to approve the audited financial statements of a company within four months of the end of the fiscal year. A copy of the audited financial statement and annual report, together with a copy of the minutes of the shareholder meeting approving the financial statement, should be certified by the director and submitted to the Registrar, along with a list of shareholders on the date of the meeting, no later than one month after approval at the shareholder’s meeting. Also, the company is required to publish the balance sheet for public information in a newspaper for at least one day within one month of the date it was approved at the shareholder’s meeting.
The annual financial statements fulfill in particular the following two important tasks: On the one hand, they inform about the economic situation of the respective company and on the other hand, they form the basis of assessment for the distribution of the result.
Information Function: The planning and future decisions of the company are based on the presentation of the financial position and results of operations on the balance sheet date. Banks and creditors use the results of the financial statements as a criterion for lending.
Payment Determination Function: The annual financial statements form the basis for determining the taxation of the company as well as the distribution of dividends and the profit sharing.
Documentation Function: The annual financial statements document the business transactions and the financial and performance-related matters presented in the bookkeeping.
To enable the preparation of the annual financial statements, the following information should be available.
- The actual stock of assets and debts is determined in the inventory. Items added to the inventory are valuated and then the difference between the planned and actual stock is booked out.
- After the determination and booking of depreciation, adjusted values of the fixed assets are included in the annual financial statements; depreciation of current assets may also be necessary.
- Claims must be reviewed and assessed for their reliability. Risks of bad debts are taken into account by booking individual and general bad debt allowances.
- Deferred income and the creation of provisions allow for accrual-based performance.
- The provision of statutory or voluntary reserves is also part of the preparations.
Feel free to contact us if you require assistance with the preparation of your annual accounts.