Most small and medium-sized companies often opt to outsource their bookkeeping and payroll to tax firms. This is because bookkeeping, which involves creating financial statements, requires expertise in accounting and tax knowledge. It's more efficient for companies to outsource this task to a reliable tax accountant rather than hiring an employee for the job.
Consequently, you'll receive financial statements from your tax accountant. These statements typically include the Balance Sheet and Profit & Loss Statement, providing a snapshot of the company's current financial standing.
However, understanding the numbers in these statements can be challenging if you're not well-versed in accounting. To bridge that gap, I'll walk you through each item in the financial statement, helping you grasp your company's current financial status.
In Profit & Loss Statement, it reveals the company's revenue and expenses.
In this first chapter, let's delve into Salaried and Wages!
1.Salaries & wages expense
Typically, Salary and wage expenses presented as the first item in your company's expenses. The amounts reflect the salaries the company pays its employees every month (or every week). and these are one of company's main expenditure (Main expenses: Cost of goods sold, rent expense, salaries and wages). This expense is crucial and can significantly impact your company's taxes. The salary and wage expense /total revenue ratio varies depending on the industry.(some type of industry's salary and wage expesne rate could be high e.g. education, consulting)
Please find the below check point on Salary and wage expense!
1-1. Your initial focus should be on reporting every salary your company pays.
While regular employee salaries are not easily excluded from the payroll, payments to temporary employees (who work infrequently) or freelance contracts for specific services, such as office cleaning, might be overlooked. Ensure that all payments to individuals are reported to payroll by collecting their names and registration numbers.
1-2. The all amounts paid to employees should be included in the salaries and wages expense category.
Companies can offer benefits to employees. If benefits are provided uniformly to all employees, the amounts can be recorded as an employee benefit item. However, if specific benefits are given only to certain employees (e.g., company-paid rent,phone bill for an employee), they should be included in the employee's salary and reported.
1-3. When the company pays bonuses to executives, it's crucial to establish the terms in the company's articles of association.
Every company has articles of association, essentially a rule book, outlining the company's basic rules. According to corporate tax law, bonuses exceeding the limit specified in the company's articles of association can be denied. Therefore, it's essential to check these documents before pay bonuses.
The same applies to executive retirement benefits; without proper rules, these benefits can also be denied as an compnay's exepense. Organize your company's articles of association accordingly.
1-4. Salaries paid to non-working employees or those paid higher than their counterparts can be denied.
Payments to individuals not working in the company's work cannot be recognized as expenses. Even when spending money on non-employees (e.g., paying rent to the company's shareholder or work education expenses), these expenses may be denied.
Additionally, if some employees receive higher salaries than others in the same position and with the same responsibilities because they are relatives of the company shareholder, these payments may also not recognized as expenses
If you are in search of a reliable English-speaking tax accountant, please don't hesitate to contact us! G-Tax Firm specializes in providing tax services exclusively for foreigners and foreign corporations in Korea. With extensive experience working with international companies, you can trust us for accurate and professional assistance
you can contact me through the information in the name card.
Or Please fill in the below form
G-tax (Tax & Accounting service)
Thank you for contacting us! Please fill the questionnaire in. We will reach out to you as soon as possible.
docs.google.com
Thank you for read my article! I hope it helps.
If you want to see more information about Korea tax and accounting, please follow us.
And if you need help for your tax filing or accountung or looking for CPA in Korea, don't hesitate to contace us
G-tax / Certified Tax Accountant / Steven Yang
+82 10 9599 7152
steven@g-tax.kr
www.g-tax.kr
