The Types of Accounting You Need to Complete as a Company in Singapore

Setting up and running a business in Singapore involves various financial responsibilities, and a key part of this is ensuring that proper accounting practices are followed. Accurate accounting not only ensures compliance with local regulations but also provides a clear financial picture to guide decision-making and strategic planning.

In Singapore, businesses are required to follow specific accounting frameworks and comply with both tax and reporting obligations set by the government. These regulations are designed to uphold transparency, maintain financial integrity, and ensure that businesses contribute their fair share of taxes.

In this post, we’ll explore the key types of accounting that every company in Singapore should complete to remain compliant with the law, streamline business operations, and maintain financial stability.

Financial accounting is the foundation of any business’s financial system. It involves the process of tracking all financial transactions—ranging from sales and purchases to expenses and liabilities—and recording them in the General Ledger (GL). The GL serves as the primary accounting record, from which businesses prepare their financial statements.

The key reports generated from financial accounting include:

• Balance Sheet: A snapshot of your company’s assets, liabilities, and equity at a specific point in time.
• Income Statement (Profit & Loss Statement): A summary of the company’s revenues, expenses, and profits over a given period.
• Cash Flow Statement: A report detailing the inflow and outflow of cash, helping to assess liquidity and operational efficiency.

In Singapore, businesses must adhere to the Singapore Financial Reporting Standards (SFRS) when preparing financial statements. For small businesses, simplified accounting standards known as SFRS for Small Entities (SFRS for SE) may apply.

Tax accounting is an essential function for any business in Singapore. This refers to the process of maintaining accurate records for tax purposes, ensuring that the company complies with the Inland Revenue Authority of Singapore (IRAS).

Key aspects of tax accounting include:

• Corporate Income Tax Returns: Companies must file an annual tax return, typically by November 30th each year. Singapore’s corporate tax rate is 17%, but various tax exemptions and rebates may apply, such as the Start-Up Tax Exemption Scheme and Partial Tax Exemption for qualifying businesses.

• Goods and Services Tax (GST) Returns: GST is applicable to businesses with a turnover exceeding S$1 million in the previous 12 months. If your company meets this threshold, you are required to register for GST. GST is a value-added tax, and GST-registered companies need to file regular GST returns (usually quarterly or annually) that report the GST collected on sales (output tax) and the GST paid on purchases (input tax). The difference between these amounts determines whether you need to pay GST to IRAS or if you are entitled to a refund.

• Withholding Tax: Companies must also account for withholding tax on payments made to non-residents. This applies to certain types of payments, such as royalties, interest, and management fees.

Tax accounting ensures that your business remains compliant with the country’s tax laws and helps avoid penalties due to underpayment or non-compliance.

While not mandated by law, management accounting is a crucial practice for internal financial management. It provides valuable insights into the operational performance of the business and helps management make informed strategic decisions.

Key elements of management accounting include:

• Budgeting and Forecasting: Developing financial forecasts and budgets based on expected future income and expenses. This helps guide business decisions and resource allocation.

• Cost Accounting: Determining the cost of producing goods or services, and analyzing how these costs impact profitability.

• Variance Analysis: Comparing actual financial results against budgets or forecasts to identify discrepancies and make necessary adjustments.

Management accounting helps business owners track performance, manage costs effectively, and plan for long-term financial success.

In Singapore, companies must adhere to audit requirements based on their size and revenue. An audit is an independent examination of the company’s financial statements, performed by an external auditor, to ensure they are accurate and compliant with accounting standards.

However, not all companies are required to undergo an audit. Audit requirements are based on the company’s annual revenue and other criteria:

• Companies with revenue exceeding S$10 million must undergo a statutory audit.
• Companies with revenue below S$10 million may be exempt from an audit, provided they meet additional criteria related to the number of employees and shareholders.

If your company is eligible for audit exemption, you still need to prepare accurate financial statements, which will be reviewed by internal or external accountants. However, businesses choosing to undergo an audit often gain credibility with investors, banks, and stakeholders.

Bookkeeping is the process of recording daily financial transactions and maintaining accurate records. While it’s part of financial accounting, it plays a pivotal role in ensuring all financial data is correct and up to date. Bookkeeping forms the basis for preparing accurate financial statements, tax returns, and GST reports.

Typical bookkeeping tasks include:

• Recording invoices and receipts: Ensuring all business transactions are documented accurately.
• Managing accounts payable and accounts receivable: Tracking amounts owed to and by your company.
• Reconciliation: Comparing bank and credit card statements with internal records to ensure accuracy.

Efficient bookkeeping ensures that your company’s financial records are in order and helps streamline financial reporting and tax filing processes.

For businesses that employ staff, payroll accounting is a vital component of overall financial management. This involves managing employee wages, benefits, and statutory contributions.

Key aspects of payroll accounting include:

• Central Provident Fund (CPF) Contributions: Employers in Singapore must contribute to the CPF for their Singaporean and Permanent Resident employees. The contribution rate depends on the employee’s salary and age group.

• Income Tax Withholding: Employers must withhold taxes from employee salaries and remit them to IRAS.

• Statutory Benefits: This includes calculating and accounting for employee benefits such as paid leave, medical leave, and maternity leave.

Payroll accounting is critical for ensuring compliance with Singapore’s labour laws and maintaining a positive relationship with employees.

As mentioned earlier, GST registration is mandatory for businesses that exceed S$1 million in taxable turnover. If your business is registered for GST, you must maintain detailed records of all GST-related transactions.

Key requirements include:

• Output Tax: GST collected from customers on goods or services provided by your company.
• Input Tax: GST paid on business-related purchases from other GST-registered businesses.

GST returns must be filed periodically, and the difference between output and input tax determines whether the company owes GST to IRAS or is eligible for a refund.

Failure to properly track and report GST can result in significant penalties, so it’s essential to stay on top of your records.

In Singapore, all companies must prepare annual financial statements, which must comply with the Singapore Financial Reporting Standards (SFRS). These statements provide a transparent view of the company’s financial performance and are a vital tool for stakeholders, investors, and regulatory bodies.

The financial statements to be filed include:

• Balance Sheet
• Income Statement
• Cash Flow Statement

Companies must submit these financial statements to the Accounting and Corporate Regulatory Authority (ACRA). For companies required to file under the XBRL (eXtensible Business Reporting Language) format, the statements must be submitted in this structured electronic format.

Companies must file their financial statements within a month of holding the Annual General Meeting (AGM). Compliance with financial reporting obligations is essential to maintaining good standing with ACRA.

Proper accounting is crucial for businesses operating in Singapore. From financial accounting and tax reporting to payroll and GST accounting, maintaining accurate records ensures that your company stays compliant with local regulations and can make informed decisions for future growth.

If you’re unsure about the accounting requirements for your business in Singapore, or if you need assistance with bookkeeping, tax filings, or audits, it’s highly advisable to seek professional guidance. 

Qualified accountants or business consultants like Berru.co can fulfill this need.