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Bookkeeping

Constructing an Income Statement

The income statement is another name for the small business owner’s profit and loss statement. This is our second section of the accounting series. We will give how’s to constructing an income statement with objectives as explain the format of the income statement, record transactions, and prepare a simple income statement.

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Recording Transactions

We have shown you the three key to the financial statements and how’s to balance the balance sheets. Now, it’s time to show you how to record transactions! In this post, we will show the example of the following transactions to be recorded. Have any questions? Leave us comments below with #tanyaFMBpartner!

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Balancing the Balance Sheets

In the previous post, we have shown you the three key to the financial statements. The first key is the balance sheet and in this post, we will explain the format of the balance sheet. Here’s how you balancing the balance sheet that you should know. Have any questions? Leave us comments below with #tanyaFMBpartner!

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Representative Offices in Indonesia in a Nutshell

A foreign investor could set up a Representative Office to study the market for a maximum period of 5 years. Foreign Representative Office is an office incorporated by an overseas company to represent itself in Indonesia with a view to managing the interest of the company or the affiliated companies in Indonesia and/ or in other countries and/ or to prepare the establishment and development of foreign investment companies in Indonesia.

Foreign Representative Office usually has limited functionality and generally are prohibited from directly engaging in operational activities, signing contracts, issuing official invoices, receiving payments from its clients, and directly engaging in any other profit-generating activities.

Foreign representative office (Kantor Perwakilan Perusahaan Asing or KPPA) is usually set up when a foreign company wishes to establish a presence in Indonesia but does not (yet) intend to actually carry on any business there. To put it simply, KPPA is merely an administrative arrangement and primarily designed for non-commercial activities. Legally, a KPPA is not a business entity per see and not allowed to perform any activity with the purpose to generate profits.

The requirements and procedure to form a representative office in Indonesia are governed by the Regulation of The Chairman of BKPM No. 15 of 2015 Regarding Guidelines and Procedures for Licensing and Non-Licensing Investment. According to this regulation, there are 3 types of Representative Offices which can be incorporated in Indonesia, namely:

  1. Foreign Company Representative Office (Kantor Perwakilan Perusahaan Asing or KPPA).

The functionality of KPPA is limited to:

  • Manage the parent company’s corporate interests.
  • Prepare the establishment and development of its business in Indonesia.

The documents required to incorporate KPPA are as follows:

  • Copy of Articles of Association of the foreign company represented and any amendment(s) in English or its translations in Bahasa Indonesia from a sworn translator.
  • Letter of appointment from the foreign company represented to whom which will be proposed as a Representative Executive.
  • Copy of passport of director of the company to be represented.
  • Copy of valid passport (for foreigner) or a copy of identification card number (for Indonesian citizen) who will be proposed as a Representative Executive.
  • Letter of a statement concerning the willingness of Representative Executive to stay, and only work in the position as the Representative Executive without doing other business in Indonesia.
  • Power of Attorney (PoA) if the application is not obtained directly by Representative Executive.

Important Notes for KPPA:

  • KPPA can only be incorporated in the capital of Indonesian provinces (e.g. Jakarta, Bandung, Yogyakarta, Kalimantan, etc.).
  • The location of KPPA must be in the office building.
  • KPPA permit is valid for 3 years and can be extended 2 times for 1 year each.
  • After 5 years KPPA may be granted an extension for different activities than before.
  • KPPA must be incorporated in an office building or tower.
  • In case Representative Executive is a foreigner, he/ she must obtain a Temporary Stay Permit Card (Kartu Izin Tinggal Terbatas or KITAS) and Work Permit to stay and work in Indonesia.

  1. Foreign Company Trade Representative Office (Kantor Perwakilan Perusahaan PerdaganganAsing or KP3A).

The functionality of KP3A is limited to:

  • Introduce, promote and market the goods produced by a parent company, as well as providing information, or directions for use and importation of goods to companies or users in Indonesia.
  • Conduct market research and surveillance in Indonesia for domestic sales of goods produced by the parent company.
  • Conduct market research on the items required by parent companies abroad (who appointed the company in Indonesia) as well as providing information about the terms of the export of goods to companies in Indonesia.
  • Closing contracts for and on behalf of the company that is appointed by the parent company in Indonesia for export of goods.

In order to perform the trading related activities in KP3A, a Foreign Company Trade Representative License (Surat Izin Usaha Perwakilan Perusahaan Perdagangan Asing or SIUP3A) must be obtained from BKPM OSS-C. The documents required to obtain SIUP3A are as follows:

  • Letter of appointment from the foreign company represented to whom which will be proposed as a Head of Representative Office.
  • Letter of intent concerning the activity of representative office in Indonesia and the regulation to not engage in any trading activities as well as selling transaction.
  • Letter of a statement concerning the willingness of Representative Executive to stay, and only work in the position as the Representative Executive without doing other business in Indonesia.
  • Letter of reference from a Commercial Attaché/ Representative of the Embassy of the Republic of Indonesia in the country of origin.
  • Head of Representative Office must attach the following documents:
    • Curriculum Vitae or CV (Daftar Riwayat Hidup).
    • Foreign citizen: a copy of valid passport and Foreign Worker Employment Plan (Izin Mempekerjakan Tenaga Kerja Asing or IMTA).
    • Indonesia citizen: a copy of valid resident identity card (Kartu Tanda Penduduk or KTP) and Tax ID (NPWP).
  • Letter of domicile of KP3A from building management or local official.
  • Copy of temporary SIUP3A.
  • PoA if the application is not obtained directly by Head of Representative Executive.

Important Notes for KP3A:

  • KP3A is prohibited to carry out any trading activities and sales transactions such as submitting tenders, signing contracts, settling claims, etc.
  • KP3A can be incorporated into the capital of provinces, districts, and cities in Indonesia.
  • KP3A must be incorporated in an office building or tower.
  • In case the Representative Executive is a foreigner, he/ she must obtain a Temporary Stay Permit Card (KITAS) and Work Permit to stay and work in Indonesia.
  1. Foreign Company Construction Representative Office (Kantor Perwakilan Badan Usaha Jasa Konstruksi or BJUK).

The license can be obtained by a Foreign Construction company with large-scale qualification as stipulated in the Ministerial Regulation. BJUK License can be used to undertake construction service business activities throughout the territory of Indonesia. BJUK License is valid for 3 years and can be extended.

Documents required for the obtainment of BJUK are as follows:

  • Application Letter (original in Bahasa Indonesia).
  • Copy of Article of Association of Company from mother country which has been legalized by a public notary or competent authorities in the country of origin.
  • General data on foreign construction services business entity.
  • Original letter of recommendation from the Indonesian Embassy in a country of origin which states that the construction company is legally registered in the country and has a good reputation.
  • Copy of valid construction service permit of the parent company which has been certified by the issuing authority.
  • Copy of equalization certificate legalized by an Institute of national level.
  • Original letter of appointment for the Chief Representative of BJUK by the parent company.
  • Record of latest financial statements of the parent company which has been audited by a public accountant.
  • Copy of passport or identity card of Chief Representative.
  • The CV of Chief Representative.
  • Domicile Certificate of the Representative Office in Indonesia issued by the local municipality office.
  • Letter of a statement of truth and authenticity of documents (original).
  • Letter of a statement that the directors or commissioners of the parent company are not serving as commissioners or board of directors in other construction companies (original).
  • Original PoA stamped and signed by company directors if the application is not directly carried out by Chief Representative Executive along with documents of the receiver of PoA.

Benefits of a KPPA:

  • Only 3 working days to process.
  • 100% foreign ownership is allowed.
  • Minimum expenses, no investment required.
  • Shareholders and directors are not necessary.
  • Fast incorporation and set up.
  • Establish a market presence in Indonesia very inexpensively.
  • Full compliance with law and regulations in Indonesia.
  • Able to apply limited stay permits (KITAS) for its foreign executives.
  • A KPPA enjoys special tax treatment and the tax authorities do not normally seek to tax a representative office. This practice is based on the theory that the KPPA carries on no business and hence has no profits here to tax.

Interested in opening a representative office in Indonesia? But still not sure which one your business needs? Get help from the experts in Indonesia company formation. FMB Partner helps entrepreneurs and international businesses set up in Indonesia.

To consult about your law, legal problems or company establishment in Indonesia, you can reach our Sr. Legal Consultant, Mey at mey@fmbpartner.com.

Let’s discuss business over a cup of coffee.

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5 tips for brilliant bookkeeping

If it’s your goal to grow a thriving business, it’s vital to have a safe pair of hands handling the accounts. Inaccurate bookkeeping can harm your business and can even result in severe penalties – but having strong financial statements can save you in many different ways.

One interesting thing about being an entrepreneur is that you like to look ahead. You tend always to look for the new opportunity, for the next challenge, for tomorrow’s customers. Mostly, it’s a great characteristic to have. However, it does mean that few entrepreneurs relish breaking their stride to deal with a pile of paperwork.

In footballing parlance, entrepreneurs would be the attacking players; the strikers and wingers. But it’s no good being able to score goals if you also keep conceding them, which is why every good attacking team also needs a strong defence and a great goalie. And in the business world, your goalkeeper is your bookkeeper.

The bookkeeper’s job is to keep rigorous accounts of all financial transactions – everything the business sells, buys, owes and is owed. This is vital, and not just because you need accurate annual financial statements. Good bookkeeping can also help with the more exciting, forward-planning side of things – because knowing the past makes it easier to predict the future.

Here are some of the key things a good bookkeeper should do.

  1. Keep your business and personal finances apart

If you’re a sole trader you are not legally obliged to have a separate business bank account – but you should have one nevertheless. Otherwise your books will soon be a nightmare to maintain, unless you record every penny of personal spending too.

  1. Keep clear and separate records

Bookkeeping typically requires at least three ‘books’ (i.e. financial records): the cash book, sales invoices, and purchase invoices.Your cash book records everything passing in and out of the business’s bank account. This record of cash flow makes it an invaluable planning tool, as you can use it to underpin forecasts.

Your sales invoice file keeps a record of all your sales. Keep unpaid invoices together in a separate section.

Your purchase invoice file should record all purchases chronologically, along with the payment method.

  1. Control your credit

A full sales ledger is a beautiful thing, but if your customers haven’t paid yet, that beauty is only skin-deep. Set strict deadlines for your customers to pay their bills to you, and consider blacklisting repeat offenders if you think they are taking advantage. Chase every late payment, as each is essentially an interest-free loan. Without rigorous credit control, a small business can quickly develop a cash-flow crisis.

  1. Track expenses

Business expenses can be claimed against tax, so tracking them is essential for cutting overheard and maintaining healthy cash flow. Use a business credit card where possible (as this itself provides a basic accounting system) and keep careful records of all other expenses, categorising them by business activity.

Categorisation of expenses can prove especially important if your business happens to be audited. Numbers on tax returns are frequently estimates  so it really helps to be able to provide supporting evidence for these.

  1. Plan ahead

One of the best reasons to keep track of where you’ve been is that it helps you work out where you’re going. Looking at the past year’s books, you can usually spot the times when a bit more forward planning would have saved you money and stress.Identify the major expenses of the year ahead and fix them in your business plan. Anticipate likely business costs (e.g. insurance premiums or IT upgrades) but always give priority to your tax obligations – you won’t be able to delay these. There may be times when your business seems awash with cash, and you may be tempted to take out more than usual – having a full roadmap of future expenses will warn you to be careful.

Bookkeeping may not sound like the most glamorous role in the business, but ultimately every other role depends upon it. Just as every goal saved is worth a goal scored, every pound saved through diligent book-keeping is as good as a pound earned. Best of all, having a safe pair of hands behind you to take care of the books gives you, as business owner, the freedom and confidence to lead from the front. An accountant can take care of your bookkeeping as well as providing a wide range of other valuable services for your business.

If you are looking for one locally, FMB Consultant offer essential bookkeeping services to ensure steady business operations. With a team of professionals and experienced accounting, allow us to manage your regular administration and bookkeeping needs, get you more time to focus on growing your business. For small talk or discussion please contact:

Managing Partner,
Ivan Liyanto
ivan@fmbconsultant.com
+62 899 6777 879

Client Management,
admin@fmbconsultant.com

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Article Source: Unbiased UK

 

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