Can a legal entity do its own accounting?
The legal entity can manage its own accounting, but accounting and taxation are quite complex and involve many steps. Additionally, the documents are quite numerous, and the law requires a legal entity to have an accountant who adheres to accounting principles to submit information to the relevant authorities, such as the Department of Business Development, the Revenue Department, and the Social Security Office. However, in reality, a company can handle its own accounting if it meets the following conditions.
If the business has employees who have completed accounting studies and meet the required qualifications, they can handle basic accounting on their own. Then, they can hire an auditor to review the accounts and issue the auditor’s report for submitting the financial statements and annual taxes.
In cases where the business does not have an accountant, the business can initially record income and expenses in a ledger or in Excel, or use ready-made accounting software, ensuring that all documents are properly kept. Afterward, they can hire an accounting firm to record the accounts according to accounting principles.
Qualifications of Accountants
For businesses that wish to handle their own accounting or hire an accountant to assist with their accounting, the accountant must meet the qualifications set by the Department of Business Development, as follows:
1. A registered partnership or limited company established under Thai law with a registered capital not exceeding 5 million baht, and total assets and total revenue not exceeding 30 million baht, must have at least a vocational certificate (VTA) in accounting or a bachelor's degree in accounting or higher.
2. A registered partnership or limited company established under Thai law with a registered capital exceeding 5 million baht, or total assets or total revenue exceeding 30 million baht, must have at least a bachelor's degree in accounting.
3. A public company established under Thai law must have at least a bachelor's degree in accounting.
4. A legal entity established under foreign law conducting business in Thailand must have at least a bachelor's degree in accounting.
5. Joint ventures must have at least a bachelor's degree in accounting, and they must have the necessary documents for accounting entries, including books, records, receipts, or other documents used as evidence for journal entries. These can be categorized into three types:
1) Documents used for accounting entries created by the accountant for issuance to external parties.
2) Documents used for accounting entries created by the accountant for internal use within the business.
3) Documents used for accounting entries created by external parties, including accounts that the accountant must prepare, such as daily accounts (e.g., purchase journal, sales journal, general journal), cash accounts, bank deposit accounts, and ledger accounts (e.g., asset ledger, liability and equity ledger, revenue and expense ledger, accounts receivable ledger, accounts payable ledger, and inventory ledger).
Benefits of Accounting
Accounting offers more benefits than drawbacks in various areas, such as:
To provide information for planning various aspects of the business, such as planning for profits and expenses, marketing, and investment planning.
To establish a good internal control system, especially in preventing potential fraud. Proper accounting can store evidence to confirm the accuracy of financial records.
To serve as a tool for finding sources of capital. When a business understands its operational results, including its profits or losses, it can use this information as evidence for tax payment and to assess the financial status of the business. This can help with securing loans from financial institutions properly.
To provide information for accurate and cost-effective tax planning. A business can plan which expenses can be utilized for tax benefits, helping to save taxes while ensuring compliance with the law.
Alternatively, if managing accounting in-house detracts from the time spent developing the business, the accounting firm can take over the task. Accounting firms offer advice on both financial matters and taxation.
After registering a company as a legal entity, businesses typically hire an accounting firm to handle accounting, financial statement preparation, and tax filing. Even though a business may meet the requirements to handle accounting internally, it must still "hire an independent auditor" to certify the accuracy of the accounts every year.
Therefore, businesses often choose to use the services of an accounting firm to ensure that experts manage their accounting and tax processes thoroughly, eliminating concerns about potential mistakes that could lead to audits by the tax authorities.