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.
Primary Documents and Entry Requisites
The foundation of debt accounting is the primary document confirming an economic event, which, unless legislation provides otherwise, must contain the name and number of the document, the date of preparation, the economic content of the operation, the data of the participating persons, signatures, and monetary or quantitative data. The accounting entry itself carries the following requisites: the date of the operation, the debit and credit accounts with the corresponding amounts, a short description, the name and number of the supporting document, and the monetary data of the operation. A document prepared incorrectly is returned to the responsible person, and corrections and additions are admissible only under procedures that make it impossible to cast doubt on the reliability of the document. Documents are signed by the person responsible to the management, by the accountant, or by other persons authorised under internal policy, and those persons answer for the reliability of the data and for the timely, high-quality preparation of the documents. Financial statements and accounting documents, whether electronic or in material form, are kept for 6 years from the end of the relevant reporting period, except where Georgian legislation provides otherwise.
Financial Reporting and Its Core Principles
The results of debt accounting ultimately flow into the financial reporting, which the subject prepares at least once a year. The reporting must be complete, correct and fair; it must reflect the financial position of the subject, the results of its activities, the movement of monetary funds and capital, and the explanatory notes, in conformity with the fundamental qualitative characteristics defined by the international standards. The selected accounting policy and methods are applied consistently, and a change is admissible only within the framework of the chosen standards. Public interest entities and first-category enterprises additionally disclose in the notes information on revenue by categories of activity and by geographical distribution of markets, and on the remuneration paid to the auditor or audit firm. The concrete measurement rules for debt balances, such as provisions against doubtful receivables, are established by the respective accounting standards rather than by this page.
Frequently Asked Questions on Debt Accounting
What are accounts payable and receivable and how are they recorded?
Receivable accounts reflect claims against third parties, payable accounts reflect obligations toward them. Every such event is recorded under the double-entry principle, on debit and credit accounts with the corresponding amounts, and each entry carries the date, a short description and the name and number of the supporting document.
Which standards govern the recording of these balances?
This depends on the size category of the subject: the first category applies the full international standards; the second and third apply the small and medium-sized enterprise standard with the right to move to the full standards; the fourth category and non-commercial entities apply their own established standards and may choose a higher standard. The category changes when, at the end of two consecutive reporting periods, fewer than at least two of the three size criteria are satisfied.
For how long must debt accounting documents be retained?
Financial statements and accounting documents, in electronic or material form, are kept for 6 years from the end of the relevant reporting period, except in cases provided for by Georgian legislation.
How We Help on Legal.ge
The Legal.ge team will help you put payables and receivables accounting in order: we will explain which reporting standard is mandatory for your entity, assist in designing the accounting policy, the chart of accounts and the document flow for debt accounting, review your existing records and prepare conclusions on their compliance.