Tax accounting software

[imaginatorium]

Bit of a problem with the tax office... I have been submitting self-employed / 個人事業 accounts for more than 30 years, and using the blue thing (青色申告) for most of that. I was a translator for the first half of that, and I now sell jigsaw puzzles on the net.

I have always done my accounts by adding up the income, and adding up the expenditure, using a spreadsheet. In practice income is almost always in big lumps, so a complete list is quite manageable; for expenses we keep the receipts. The tax office decided to inspect my accounts, which is quite reasonable, since we are getting a huge SHZ / VAT refund every year - basically 1/11 of costs excluding the Post Office.

Anyway, they say they "would prefer it if I used 簿記ソフト (accounting software). Unfortunately I know nothing of how this would work any differently from what I do now. Can anyone give me a 10-minute introduction to double-entry bookkeeping? I think the problem is the 貸借対照表 (asset balance something??) and a mystery thing called 事業主貸, which I have glossed as "withdwgs", and it is basically caused by having the same bank account for personal and business use. So the number itself means nothing to me. I wonder - does general accounting software automatically generate these numbers? Sorry, mustn't ramble - but suggestions would be gratefully accepted.

[mikele3]

as far as I know this is supposed to be the best option in Japan:
https://www.freee.co.jp/

I am often looking into it, as it is frustrating not having this kind of software support, but unfortunately, the language barrier is still too big for me to being able to use it.

What I did for the past 12 years is paying an English speaking accountant to handle both the business account and my personal account.... pricey, but I wouldn't know how to do it otherwise.

[Beaglehound]

I don’t think it would involve doing anything massively different from what you do now. I do my tax return using software and it basically involves inputting every transaction in your bank account as well as any cash payments/expenses/deductions. Like you, I use the same account for business and personal so there are a lot of irrelevant details but you label every transaction accordingly and the software calculates your balance sheet for the business. I have my sister-in-law available to help which makes things much easier but I could likely manage it myself with a lot more faff.

About the mystery figure, I remember having to basically make up a starting figure, I assumed as a starting point for counting business assets. As I understand it, this figure could be anything, the software basically calculates your incomings/outgoings in relation to this random number. But, as evidenced by the woolly answer, I clearly don’t fully understand that myself

[eagleyes]

Mikele3 suggestion is indeed the best but could be difficult to handle.

I can also suggest the following site which provide a free software on excel to include the business operations and it generates automatically your balance sheet and profit and loss statement. http://management.main.jp/excelb.html

You can use the following translation vocabulary on this website to help you understand.　https://www.toishi.info/email/balance_sheet.html

I have Boki 3 and I got almost the 2 as well so I have some knowledge of accounting and can reply to specific question in dm if required.

[seb]

Personally I found it easier to create a separate "Business name" bank account. It's a private account, and must contain your full name, but you can add some business name in it. My account was "BUSINESS DOE MARK JOHN" and I tried as much as possible to pay myself a stable salary+expenses to my personal account. It's as easy to open as a normal account (because it is) although the teller was a bit confused and had to call her manager who immediately understood.

The details were handled by an accountant too, but it made it much easier to have all the business finance in 1 separate place.

Then again, I haven't been controlled so far, and I have switched to an incorporated entity, but still do my accounting in excel sheets.

[imaginatorium]

Thanks for the responses! A number of good points; in particular I think we really should have a separate Wise account for business purposes.

Anyway, I found a 10-minute video to explain DEBK, and here is my summary (I watched about 8 mins, which seemed enough)...

--------------------
Video by Daniel King https://www.youtube.com/watch?v=ijPDIy6gXxc

"Debit the receiver - Credit the Giver"

1. Put (own money) capital into business (8:35)

Capital a/c: Credit E100,000
Bank a/c: Debit E100,000

2. Buy office (9:20)

Bank a/c: Credit E70,000
Premises a/c: Debit E70,000
--------------------

(I will put "A-" on the front of accounting terminology, to distinguish it from English.)
OK, so after two transactions we begin to understand that accounting terminology is meant to be confusing. After puttin 100K into the bank account, and drawing 70K out, the "A-bank-account" has recorded 30K on the A-debit side, even though in English you would say that the account is 30K in credit. This seems to go back to history, and the WP article https://en.wikipedia.org/wiki/Debits_an ... e_accounts 'History' section has some interesting comments suggesting that changing the words could making accounting instantly understandable to the ordinary person, which would not be Good News for accountants.

Again, the words for each side in English, Italian (sort of the original), and Japanese are:

Left=debit=dare=貸 (note that 'dare' means "give" or "relinquish ownership of"; 貸す means almost the opposite)
Right=credit=avere=借 (similarly 'avere' is "have", while 借りる means to "borrow", absolutely not "to own")

But setting the terminology aside, it's easy to see that through the year, if you write down money from the bank account spend on packaging as a transfer from "cash" to "packaging", at the end you will have the total spent on packaging ready to write on the (much more instantly understandable to an ordinary person) tax form. And so on.

And since double entry bookkeeping was originally a way of double-checking manual arithmetic, it is obvious that no-one actually uses it now. I mean, no-one actually writes two actual copies of the same actual number in two actual columns of an actual ledger. So what does the requirement to use it mean? Hmm. I don't know.

Anyway, the tax office concluded that we are not "doing proper DEBK", and reduced our aoriro allowance to 10man for two years. So it's sort of serious, but I am not inclined to argue. There is one thing that I agree is "not quite the proper way", and I am semi-convinced that they agree that this is the problem. When we started, we were selling 1000-piece puzzles through PayPal for $28, since PayPal only handled USD at that time. Look! Here: https://web.archive.org/web/20020811203 ... sp1000.htm

So a number of payments of $28 appeared in our PayPal account, then eventually there was enough for us to withdraw 100,000 yen. At the moment at which the money was converted to yen, I could reliably write down the actual income to our business in yen, so that is what I did. Simply write down each withdrawal from PayPal, then at the end of the year write down the PayPal balance converted to yen as (net) income. At the beginning of the next year, write down this balance amount as negative* income. this way the adjustment gets the year's income to the equivalent of the dollar amount, avoiding possible cumulative errors. Unfortunately, this does mean that we are not quite writing down the "proper" amounts; each PayPal transaction consists of a sale value less a handling fee, so although the balance is exactly correct, our year's gross sales exclude these PayPal fees, and this (I hope) is really the problem they are raising.

* It's interesting that the tax office seems happy to accept negative numbers, even though the Italian medieval merchants used DEBK partly as a way of avoiding them. ("European mathematicians, for the most part, resisted the concept of negative numbers until the middle of the 19th century (!)" - Wikipedia)

Now PayPal is multi-currency, and essentially all our sales are in yen, so we could write everything down. There are a huge number of entries, but I can get them electronically, I can store them in our database, then, um, I either have to find an accounting system into which I can do a bulk import, or just do the accounts myself. That still leaves the question of handling other payments which are in foreign currency, unless they are converted immediately.

That's enough for now, but I would be grateful for further enlightenment.

[imaginatorium]

OK, well, philosophy aside, I would be really grateful for help on the basics here. The tax office are quite cooperative and helpful, so I can ask them again, but I need a bit more to go on.

They were helpful, and yet, their explanation was not very clear. They kept using the term 集計ソフト or 集計的, as opposed to "proper 簿記ソフト" and I really do not know what this means. (It doesn't seem to have any clear meaning in computer science, of which I am sure my understanding is better than theirs.)

So if we used Freee, or similar, do I understand correctly that every transaction in (the relevant) bank accounts (and the credit card statement?) has to be written in this list, whether related to business or not, with some sort of classification, so that non-business transactions only contribute to making the final balance equal to the initial balance plus the sum of all transactions.

Mustn't ramble. Can anyone help with the 集計 term?

[Beaglehound]

I think you have it right. What I do is basically input every single transaction in my main bank account with a classification. Anything else, e.g. cash payments, is entered separately with its own ‘cash’ classification. Same goes for deductions, some are related to my bank account, but some utilities come out of my wife’s account. These need to be entered as ‘genkin’.

[imaginatorium]

Thanks for the previous help on this. We have just been getting demands for extra tax, mostly local tax and health contributions, for two of the last three years. The burden is heavy enough that I really want to submit accounts for 2021 which the tax office accepts. So I have some specific questions about the freee system among others, but I think I will put these in the "Taxes" forum, in the hope of more people reading it...