Legal Foundations of Accounts Payable and Receivable
In Georgia, accounting and financial reporting are governed by the Georgian Law on Accounting and other normative acts, unless a normative act regulating a particular sector provides otherwise. The law requires that accounting and financial reporting conform to international standards of financial reporting, and this requirement fully extends to payables and receivables: such balances must be recognised and measured under the rules of the applicable standards. Every economic event, including the origination and settlement of debt, is recorded under the double-entry principle — each entry simultaneously affects debit and credit accounts with the corresponding amounts indicated,.
Reporting Standards and Entity Categories
The system of standards consists of the international standards known as IFRS, the standard established for small and medium-sized enterprises, and the standards established for fourth-category enterprises and for non-commercial legal entities. First-category entities prepare their reporting under the full standards; second- and third-category entities apply the small and medium-sized enterprise standard, with the right to use the full standards; fourth-category enterprises and non-commercial entities apply their own established standards, remaining free to choose a higher standard. If a subject or a group no longer satisfies at least two of the three size criteria at the end of two consecutive reporting periods, its category changes; a move to a different standard is possible only toward the standard of a higher category, and the category of a group is determined from consolidated data.
Organising Debt Accounting and Internal Control
A subject maintains its accounting through an employed accountant or an accountant providing professional services, or through an accounting or an audit firm. Accounting is conducted on the basis of natural units of measurement, in a generalised form, in monetary terms, with chronological, continuous and documented reflection of events. For complete debt accounting, the subject defines its accounting policy, develops a chart of accounts within the framework set by legislation, creates a mechanism for the production and control of documents reflecting economic events, determines the timeframes and technology for processing accounting information, and keeps records in material form or through electronic information systems. The subject also develops an internal control system — a combination of business processes and business rules — ensuring the efficiency of its activities, the reliability of its reporting and its compliance with Georgian legislation.