We are captured by technology or a couple of words about financing and accounting systems (part 2)

Justyna CHRZANOWSKA
Accounting Supervisor at RSM Poland

BOOKS OF ACCOUNTS IN PRACTICE – FOR A SOFTWARE ENGINEER

So how do we go about bookkeeping if we want to seize the opportunity of keeping the books abroad within the established structures, which reduces the company’s costs, while avoiding any additional costs that may be incurred in the event the correctness of the bookkeeping is challenged? Theoretically the easiest, yet often the most difficult solution is to rely on properly configured bookkeeping software. ‘Properly’ means in line with the requirements set forth in the Accounting Act, which devotes an entire chapter to this (Chapter 2 of the Accounting Act: Keeping the books of accounts). What we are usually offered are general guidelines on what to focus on when checking if the financing and accounting system meets the requirements of the Polish regulations, but it is hardly ever the case that software engineers are simply shown the very provisions of the act stipulating specific requirements for accounting software that must be followed if you do not want to be accused of a failure to adjust the software to bookkeeping compliant with the Polish rules and principles. And these fundamentals are given on a silver platter right there in our Accounting Act:

• books of accounts should include a general ledger and subsidiary ledgers along with journals for types of documents singled out by the entity,
• accounting software should enable a trial balance to be generated for any given day both for the general ledger and subsidiary ledgers,
• the trial balance should include, but not be limited to, the number and name of the account, opening balance sheet for the beginning of the reporting period (year), total activities for a given reporting period and cumulatively year-to-date, and the closing balance sheet for the last day of the reporting period,
• software should offer the option to print out or export data to electronic formats (e.g. PDF, Excel, etc.); even though this requirement pertains specifically to information resources organised in the form of separate electronic data sets, and not books of accounts as such, the ICT development imposes such options despite the lack of regulations in this respect),
• computerised books of accounts along with every print-out made therefrom must include:
  • name of the entity,
  • name of the book,
  • name of the processing software used,
  • marking of the financial year,
  • marking of the reporting period,
  • preparation date of the printout/statement,
  • page numbers, with the first and the last page being marked,
  • summary of values on each individual page of a given statement,
• every accounting entry should include:
  • item number in the journal
  • sequential number in the book,
  • data enabling identification of the person responsible for making the entry,
  • source document number,
  • transaction date, document date and the date of entering the document.

Polish software engineers, so appreciated all over the world, handle these technical aspects excellently. So why is it such a problem in foreign financing and accounting systems, if technical aspects are half the battle?

BOOKS OF ACCOUNTS IN PRACTICE – FOR AN ACCOUNTANT

Persons who keep books (both persons who merely enter data and those who are responsible for this data) should remember about other technical rules, which are also defined in the Accounting Act, e.g.:

• keeping books of accounts in the Polish language and currency. As Radosław Osmólski has already mentioned, using Polish for bookkeeping applies to contents that are entered, and not the interface of the accounting software; it should be borne in mind, however, that entered contents include for example the chart of accounts used by the entity;
• updating the adopted accounting policy, i.e. documentation describing the accounting principles adopted by the entity;
• making entries in chronological order;
• making entries according to the double-entry principle.

If books are kept outside the territory of Poland , the most common stumbling blocks to compliance with conditions imposed by the Accounting Act are as follows: accountants do not speak Polish (as a result, books are kept in a different language), there is no unique number for accounting operations that would enable to extract the entire accounting entry from the book (i.e. complete entering of the document), records are kept only on synthetic accounts (subsidiary ledgers with analytical accounting are kept outside the accounting software), subsidiary ledgers are inconsistent with the general ledger, and books are not kept in line with the adopted accounting policy.

BOOKS OF ACCOUNTS IN PRACTICE – FOR MANAGERS

Because of all the shortcomings of implementing guidelines set forth in the Accounting Act, in the event of a tax audit, the entity’s manager can be accused of keeping the books contrary to the provisions of the Act, and as a consequence he can be subject to a fine or imprisonment of up to 2 years, or to both penalties (Article 77 paragraph 1 of the Accounting Act). Such sanctions can be imposed also in the event books of accounts are not kept at all.

Under the Accounting Act, books of accounts shall be kept in a reliable, error-free and verifiable manner and on an ongoing basis (Article 24 of the Accounting Act). ‘Reliable’ means that book entries must reflect the actual situation. ‘Error-free’ means that books must include accounting documents that have been approved for entry in a given period in a complete and correct manner, and must ensure the continuity of entries and error-free operation of calculation procedures in place. ‘Verifiable’ means that books must enable the verification of the correctness of the entries, balances and the operation of calculation procedures in place (in particular, identification of accounting documents, chronological order of entries, classification of accounting documents or access to information from the accounting software). ‘On an ongoing basis’ means that the books must enable the timely preparation of reports (financial and others, including tax returns) the entity is obliged to submit.

Bookkeeping, either in Poland or abroad, does not have to be a stressful effort because of the responsibility for non-compliance with the conditions laid down in the Accounting Act. In Poland, one hardly ever finds bookkeeping software (either from Polish producers or dedicated for the Polish market) that is not adjusted to statutory requirements at least in the basic scope; thus, the problem tends to rear its head when books are kept in foreign systems, in particular if bookkeeping is being done abroad. Managers of Polish entities are usually aware that the situation is serious, and are trying to have an impact on the choice of software for keeping the books abroad if the books are kept for a group of companies, and if they do not have an impact on making this choice, they mostly rely on shadow accounting. However, if the entity’s managers are foreigners, this is not so obvious for them; what is more, they tend to disregard this aspect. Such persons should nevertheless be aware of the fact that neither the ignorance of the Polish law nor the very fact of keeping the books abroad will exempt them from any criminal liability for non-compliance with the provisions of the act.

The year 2018 is critical for Polish entrepreneurs when it comes to electronic reporting. All VAT taxpayers are already under the obligation to submit SAF-T as regards their VAT records, soon more obligatory SAF-Ts will be introduced, along with electronic financial reports. Is this going to be traumatic for managers to implement necessary changes in the financing and accounting systems to ensure compliance? Or perhaps they will smile with triumph when thinking about the ICT progress so evident in the Polish law? I think that in many cases it will depend on being on good terms (both technical and social) with our software engineer. And that is what I wish for you and myself.