The Legal Basis of Monthly Bookkeeping in Georgia
Monthly bookkeeping in Georgia is not merely a practical routine but a legally loaded discipline: the Law of Georgia on Accounting and Financial Reporting defines precisely by which standard, under which rules and by whom the records must be kept. Under Article 3 of the law, accounting and financial reporting are regulated by the law and other normative acts of Georgia, and must conform to the international standards of accounting and financial reporting. The system of standards is layered: the full International Financial Reporting Standards (IFRS); the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs); the standard set for fourth-category enterprises; and the standard set for non-commercial (not-for-profit) legal persons. Application of these standards is mandatory, and the Service ensures the introduction of updated standards within 6 months of their renewal; a reporting entity is entitled to use the current English-language text of the standards. Choosing the right layer and applying it consistently is the first obligation of every monthly accounting cycle.
Who Keeps the Books and Under Which Standard
The choice of standard depends on the entity's size category. Public-interest entities and first-category enterprises keep records and prepare reports under the full IFRS; second- and third-category enterprises apply the IFRS for SMEs, with the right to move up to the full IFRS; fourth-category enterprises and non-commercial legal persons apply the standards set by the Service, and they too may opt for a higher standard. The formal routes for keeping the records are likewise defined by law: an entity keeps its accounting through an employed accountant or an accountant providing professional services, or through an accounting firm or an audit firm providing the service. This means that a missed monthly cycle or an incorrectly built records structure is not a private inconvenience — it is a breach of these norms, with consequences described below.
The Daily Discipline of Record-Keeping — Article 4
Article 4 unpacks the monthly routine into concrete, applicable rules. The entity keeps its records on the basis of natural units of measurement, in generalized form, in monetary terms, with chronological, continuous and documented reflection; an economic event is recorded in the accounts as soon as it occurs, under the double-entry principle, and belongs to the accumulated documents and to the reporting of the period to which the event relates. A bookkeeping entry carries the statutory requisites: the date of the operation, the debit and credit accounts with the corresponding amounts, a short description, the name and number of the primary or accumulated document, and the monetary measurement of the operation. The primary document has its own mandatory requisites — name and number, date of compilation, the economic content of the operation, the participating persons and their identification data, signatures, and quantitative and monetary indicators. The entity must ensure the completeness of recording of every economic event and internal control over it; it must define its accounting policy, develop the chart of accounts, build the document-flow and control mechanisms, and maintain an internal control system covering its business processes. Control over both the form and the content of documents is obligatory: a document incorrectly compiled is returned to the responsible person, and the preparers and signatories answer for the reliability of the data. Records may be kept on paper or through electronic information systems, and reports and accounting documents are retained for 6 years from the end of the relevant reporting period.
Liability and Fines — Article 26
Breaking the monthly discipline has a direct price. Under Article 26 of the law, failure to comply with the rules on conducting and consolidating accounting and financial reporting, or evading an audit inspection, results in a fine on the entity scaled to its size category: a fourth-category enterprise is fined 500 GEL, a third-category enterprise 1,000 GEL, a second-category enterprise 5,000 GEL, and a first-category enterprise or a public-interest entity 10,000 GEL. At the same time the Service may apply a written warning instead of a fine; failure to comply with the demand set in the warning within the given period — which may not be less than 1 month — may lead back to the fine. In other words, properly organised monthly bookkeeping is the cheapest protection against sanctions, because it removes the very basis on which they are imposed.
Frequently Asked Questions
Which standard applies to a small company?
Second- and third-category enterprises apply the IFRS for SMEs, with the right to use the full IFRS voluntarily; fourth-category enterprises apply the standard set by the Service.
Who may keep the accounting records?
An employed accountant, an accountant providing professional services, an accounting firm or an audit firm — the law defines these four routes.
How long must accounting documents be retained?
Financial reports and accounting documents are retained for 6 years from the end of the relevant reporting period.
What fines follow from breaches of the accounting rules?
By category: from 500 to 10,000 GEL; the Service may also apply a written warning instead of a fine.
How We Help on Legal.ge
Monthly bookkeeping demands the right choice of standard, disciplined document flow and forward management of fine risks. On Legal.ge you can engage a specialist in accounting and tax legislation who will put your records in order, define the accounting policy and protect the company from sanctions. Submit a request on the site and get qualified assistance.