Foundations of Bookkeeping
Financial statement preparation begins with properly kept accounting records: the entity keeps its accounts on the basis of natural units of measurement, in generalised monetary expression, with chronological, continuous and documented reflection of events. The records may be kept through an employed accountant or an accountant providing professional services, as well as through services rendered by an accounting or an audit firm. Economic events are entered in the records under the double-entry principle, immediately upon occurrence, and are attributed to the period to which they relate. Every entry carries defined requisites — the date of the operation, the debit and credit accounts with the amounts, a short description and the reference to the primary document. A primary document confirming an economic event carries mandatory requisites: its name and number, the date of compilation, the economic content of the operation, the names and identification data of the participating persons, signatures, and monetary or quantitative data. The entity itself determines its accounting policy, develops the chart of accounts, builds the mechanism for producing and controlling documents, and establishes an internal control system that safeguards the reliability of the reporting. Accounting documents are signed by the person responsible to the management, the accountant, or other persons with the authority defined by internal policy.
Principles and Standards of Reporting
Financial statements must be complete, correct and fair: for the comparable period they must reflect the entity's financial position, the results of its activity, the movement of funds and capital, and explanatory notes. The information given in the statements must conform to the fundamental qualitative characteristics defined by the international standards of financial reporting. An entity prepares financial statements at least once a year, and the selected accounting policies and methods must be applied consistently. A special rule concerns fourth-category enterprises and non-commercial legal persons: their statements are prepared only in accordance with the standards established for them. The documents presenting the statements must indicate the entity's name, legal form, legal address and registration data, so that every report is identifiable and verifiable at any moment.
Audit Requirements by Category
Public-interest entities, first and second category enterprises and groups are obliged to ensure the audit of their financial statements under the procedure established by law, unless other rules are set by the regulatory acts of the relevant field. This requirement extends to a subsidiary enterprise belonging to a group. Third and fourth category enterprises and non-commercial legal persons are exempt from the audit obligation, unless something else is established by the legislation. For enterprises supervised by a regulatory body, the question of an audit of interim statements is decided by the legislation of the relevant field, which means that the need for an audit always follows from the category and the field of the particular entity. Determining the correct category in advance is therefore not a formality but the starting point of the whole reporting cycle.
Deadlines for Submission and Publication
An entity is obliged to submit its financial statements, management report and the report on payments made to the state, together with the audit conclusion where applicable, immediately but no later than 1 October of the year following the reporting period. The Service publishes the submitted statements within 1 month of submission. Where the entity's reporting period does not coincide with the calendar year, the statements must be submitted as soon as they are available, but no later than 9 months after the end of the period. The Service ensures selective verification of the compliance of the submitted statements on a risk-based approach and is entitled to demand the elimination of revealed deficiencies. Missing a deadline turns a technical obligation into a liability question, which is why deadline management belongs in the core of any reporting project.
Document Retention Period
Financial statements and accounting documents, whether electronic or in material form, are kept by the entity for 6 years from the end of the respective reporting period, except in cases provided for by the legislation. The persons who compile and sign the documents answer for the reliability of the data reflected in them, while responsibility for the preparation of fair financial statements rests on the entity under the procedure established by law. Where a primary document is incorrectly compiled, it is returned to the responsible person, which in practice means that every entry must be documented and verifiable. A retention discipline built in advance protects the entity years later, when a specific entry suddenly requires proof.
Frequently Asked Questions
How often are financial statements prepared?
At least once a year, and the submission deadline is 1 October of the year following the reporting period.
Who must have their statements audited?
Public-interest entities, first and second category enterprises and groups; third and fourth category entities and non-commercial persons are exempt unless the law provides otherwise.
For how long are reporting documents kept?
Financial statements and accounting documents are kept for 6 years from the end of the reporting period.
When are statements submitted for a non-calendar period?
Where the reporting period does not coincide with the calendar year — as soon as available, but no later than 9 months after the end of the period.
How We Help on Legal.ge
Financial statement preparation demands precise consideration of standards, deadlines and categories. Our team will help you select the accounting policy, develop the forms of the statements and manage the submission process. Contact us and receive a plan tailored to your entity.