Low-effort Accounting Process in Japan

【Koshida Accounting Firm Column Date:

“Rather than love, than money, than fame, give me truth.” – Henry David Thoreau
「愛よりも、お金よりも、名声よりも、私は真実が欲しい」- ヘンリー・デイヴィッド・ソロー


a man and graphes


Hello, my name is Taisei Koshida, and I am a certified public accountant and tax accountant.

I aim to assist non-Japanese business owners who struggle with reading or writing in Japanese. If you find the Japanese tax return system challenging, I can help you with your tax filings.


In the realms of accounting and taxation, there are two main methods: accrual and cash basis.



The effort and time required for accounting vary depending on which method you choose. In this discussion, I will explain which method is more suitable for small businesses.



My hope is that you can manage tax risks effectively while also reducing the effort and time associated with accounting.




1. The Accrual Basis and the Cash Basis 発生主義と現金主義

The accrual basis of accounting records sales and purchases when the right to receive payment or the obligation to pay is established. Conversely, the cash basis records sales and purchases when the actual payment is received or made.




2.Specific Examples of the Accrual Basis 発生主義の具体例

Taking sales as an example, under the accrual basis, sales are recorded when the right to receive payment is established, typically when goods are delivered or services are provided. For a business that sends invoices for sales from the beginning to the end of the month, the sales would be recorded on the date the books are closed at the end of the month.



3.Specific Example of the Cash Basis 現金主義の具体例

Under the cash basis of accounting, sales are recorded at the time of receiving payment. In the previously mentioned example, where invoices are sent in the early part of the following month after the end-of-month closing, it’s common for the payment to be due at the end of the following month. In this scenario, the month in which sales are recorded is one month later compared to the accrual basis.




4.Advantages and Disadvantages of Each それぞれのメリットデメリット

The accrual basis provides a more accurate representation of a business’s financial activities. The cash basis, on the other hand, is simpler and less labor-intensive as it involves recording transactions based on cash and bank deposits.



Conversely, the accrual basis requires more effort and time as it involves recording transactions that extend beyond just cash and deposits, such as monthly sales. Additionally, it necessitates a double effort in recording sales and accounts receivable.



5.What to Look Out for in Taxation 税金で気を付けること

However, even if you maintain monthly records on a cash basis, you must revert to the accrual basis for the year-end financial statements. For instance, a company with its fiscal year ending in March must record March’s accrued sales in the financial statements, even if the payment has not been received by the end of March and therefore was not recorded under the cash basis.



6.Recommended Accounting Treatment お勧めの会計処理

If precise monthly sales tracking is not essential, it may be more efficient to use cash basis for monthly accounting to reduce effort and time, and switch to accrual basis only for recording unpaid accrued sales when preparing the year-end financial statements.



Additionally, if you have a consistent payment cycle, such as closing books at the end of the month and receiving payments the following month, you can balance accounting accuracy and bookkeeping simplicity by recording sales in the month prior to receiving payment.





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