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Accounting
Requirements of a Close Corporation (CC)
A CC has
similar accounting
requirements to a sole trader or partnership when compared to the daily
transactions such as sales, cost of sales etc.
The difference between a CC and sole trader, partnership or other forms of business
ownership is the
accounts concerning CC members.
Examples
of the CC accounts are: payments to members, contributions by members
and other transactions regarding members of the CC.
The Close Corporations Act sets rules that prescribe the minimum
accounting records that must be kept by close corporations.
Accounting Records of Close
Corporations (CC)
Close
Corporations are required to keep accounting records that will enable
them to:
- Present
the state of affairs of the business in a fair manner
- Explain
the transactions (for the financial year) and financial position of the
CC. (Usually on the Balance sheet date)
The
following accounting records must be kept:
- Records showing all assets and liabilities
- Records
showing members contributions, retained income (undrawn profits) and
revaluations of fixed assets (being members funds of the CC)
- Records showing loans to and from members
- Records
containing entries from day to day transactions, all cash received and
paid out (Cash Receipts Journal and Cash Payments Journal)
- Records of all goods purchased and sold on
credit and services rendered on credit
- A fixed asset register
- Statements of annual stocktaking showing both
the number of items and the value of the stock on the balance sheet date
- Vouchers supporting all entries in the
accounting records
- The accounting records relating to:
- Contributions of members
- Loans to and from members
- Payments to members, e.g. salaries,
distributions, interest payments) records must contain sufficient
detail of individual transactions to enable the nature and purpose of
the transactions to be identified.
The
accounting records of the Close Corporation must be kept in a safe,
secure place of the business or the registered office. The accounting
records must be open at all reasonable times for inspection by a
member. An Accounting Officer
of the CC will usually assist with the financial statements. The
accounting records of a Close Corporation (CC) must be
controlled properly and effectively to ensure accurate information is
recorded, an accounting officer can assist in complying with the
accounting requirements of the CC.
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