Accounting System

At the very least, you should take care when implementing an accounting system in Indonesia.



Tax rate and BI rate (transaction rate)

Therefore, the exchange rate master in the accounting system must have two rates, BI (Bank Indonesia) rate and Tax rate, since the tax rate published by the tax office (Kantor Pajak) every Wednesday is mandatory for calculating the tax amount related to foreign currency transactions.

Just like the rates published by private banks, the BI rate has TTS, TTB, and TTM, however, it is TTM that is set as the day's rate in the foreign exchange master of the accounting system, and there is no case to set TTS and TTB separately for selling and buying transactions.

In the case of a rupiah transaction in a company whose functional currency is rupiah, if you make A/P Entry (debt entry) and A/P Approval, 10% of VAT will be automatically calculated and the following journal entry will be automatically generated as a transfer voucher.

VAT journal entry for rupiah transactions

  • Dr. Purchase Rp. 900,000          Cr. A/P Rp. 900,000

Automatic generation of VAT journal entries

  • Dr. Prepaid VAT input Rp. 90,000      Cr. A/P Rp. 90,000

Since the VAT journal entry is made on a rupiah basis, regardless of whether the functional currency is rupiah or dollar, there is no foreign exchange conversion if it is a rupiah transaction, but if it is a foreign currency transaction such as dollar, there is always a foreign exchange conversion by the tax rate in the VAT portion.

If the tax rate is $1=Rp.10,500, $100×10%x10,500=Rp.105,000 will be the journal entry for both the transaction currency and the functional currency, but if the BI rate is $1=Rp.10,000, the transaction part will be as follows.

VAT Journals for Dollar Transactions

  • Dr. Purchase $100           Cr. A/P $100

Automatic generation of functional currency and VAT journal entries

  • Dr. Purchase Rp.100,000        Cr. A/P Rp.100,000 ←BI rate $1.00 = Rp10,000
  • Dr. Prepaid VAT input Rp.105,000    Cr. A/P Rp.105,000 ←Tax Rate $1 = Rp10,500

In this case, the BI rate and the tax rate must be retrieved from the exchange rate master from the debt entry screen, but if it is difficult to do so in the system, the following three methods of operation will be used.

VAT is manually calculated.

The system automatically calculates both the trading and VAT parts of the system using BI rates from the exchange rate masters, but the VAT part of the system is manually calculated and modified using the tax rate and leaves a note of the tax rate in the application field.

Separate input for transaction and VAT portions.

In this case, the A/P voucher number of the transaction journal and the Transfer voucher number of the VAT journal are different, so it is necessary to manage the linkage by using the invoice number as a key.

The VAT part is washed at the end of the month.

When a transaction occurs, the VAT portion is automatically generated in the original currency of the part of the transaction, and is washed at the end of the month.

When the transaction occurs

  • Dr. Purchase $100      Cr. A/P $110
  • Dr. VAT clearing $10

Faktur Pajak (Tax Invoice) amounts are aggregated on a monthly basis for bulk rewashing.

At the end of the month

  • Dr. Prepaid VAT input Rp.105,000      Cr. VAT clearing $10

Faktur Pajak (Tax Invoice) for VAT returns

Indonesia uses the invoice method instead of the bookkeeping method and calculates VAT based on Tax Invoice.

(It has been decided that Japan will also adopt the invoice method from 2021 due to the introduction of reduced tax rates).

The bookkeeping method calculates the amount of tax, such as consumption tax, based on the amount of tax included in the book, but the invoice method calculates the amount of tax stated on the invoice, so it is easy to calculate even if the tax rate differs for different items and services.

A Faktur Pajak (Tax Invoice) is required for tax payment and refund request, which is always generated in combination with the invoice.

(As of August 2016, Faktur Pajak will be issued from the e-Faktur system, so there is no longer a need to develop a dedicated form in the accounting system.)

Compliance with International Financial Reporting Standards (IFRS) for accounting systems

Japanese accounting standards emphasize on the profit and loss statement (P/L), which is due to the fact that it was easy to predict the future based on the period profit and loss of the current period alone, assuming the economy was growing rapidly during the high growth period.

In short, after preparing P/L, assets, liabilities, and capital items that will be the source of income and expenses in the next and subsequent periods are recorded as supplementary balance sheet (B/S), and there is a strong tendency to verify and reevaluate B/S items and report them as they are, or rather, to treat the taxable value as the assessed value for accounting purposes as it is, and to account for it as an extraordinary profit or loss when the amortization is completed, which is called the revenue cost approach.

On the other hand, IFRS accounting standards aim to provide investors and creditors with the information they need to evaluate the value of an enterprise, and to do so, it focuses on B/S, which includes impairment and revaluation of fixed assets and mark-to-market valuation of available-for-sale financial assets to accurately prepare B/S, so that they can see whether the asset situation is capable of generating cash flows in the future.

While IFRS-based financial reporting will be mandatory for consolidation, we will continue to need to prepare financial reporting on a country-specific basis for tax purposes, which is called the asset-liability approach.

This is called the asset-liability approach. Since it is a global standard, all the rules are defined in English, and they are defined from a global perspective without taking into account local requirements, including tax considerations. While IFRS-based financial reporting will be mandatory for consolidation, each country will continue to be required to prepare its own financial reports for tax purposes.

While IFRS compliance will be mandatory for investors and creditors for accounting purposes, it is not always possible for tax authorities to comply with this. So, ideally, the accounting system should implement a multi-base ledger function.

When we talk about system compliance with IFRS, there are two types of cases: system modification and operation change.

Recording sales on a realization basis

Sales are recorded on a shipping basis or an acceptance basis, and the accrual of credit depends on the timing of issuing an invoice. The following is an example of journal entry based on the acceptance inspection.

Periodic Method


  • None

Issuing Invoice(Inspection finished at the customer side)

  • Dr. A/R 100,000    Cr. Sales 100,000

Perpetual Method


  • Dr. A/R Accrued 60,000    Cr. Inventories 60,000

Issuing Invoice(Inspection finished at the customer side)

  • Dr. COGS 60,000    Cr. A/R Accrued 60,000
  • Dr. A/R 100,000    Cr. Sales 100,000

After sending out the invoice, there are times when NG is discovered at the time of inspection at the customer's site or at the time of inputting the invoice in the manufacturing process, and in those cases, the method of correcting the issued invoice (A/R) is as follows

  1. Replacement goods are delivered and returned to the warehouse through inventory adjustment, with no invoice change (Tukar guling).
  2. Cancel and reissue an invoice for the OK portion only.
  3. After issuing a revised invoice in the shipping return process, register a new order for NG.
  4. Negative invoice issued and shipping returns in return order processing after the closing process.

When you ask the customer to dispose of the NG items and adjust only the invoice amount, you issue a credit note (with debts to be paid) from your company and ask the customer to issue a debt note (with receivables to be received) for adjustment.

If the invoice is issued after the shipment, there is a method to keep inventory and accounting synchronization between the shipment and the acceptance inspection (i.e., the reduction in inventory is transferred to current assets) by using an accrued revenue account called A/R Accrued.

Unification of inventory evaluation methods

Since we need to standardize the inventory valuation method within a consolidated company, we generally follow the method of Japan headquarters, which is permitted by IFRS, such as FIFO, moving average method, standard cost method (standard unit price method) and gross average method, and LIFO method is not permitted.

Separate management of physical and financial inventory

Since the cost of sales is fixed by the end-of-month inventory and the inventory decreases during the month due to shipment, but the beginning of the month balance remains in accounting, the unmatch is managed as an asset of unrealized sales (unearned revenue) in the auxiliary form.

In this case, instead of making a journal entry for inventory transactions at the time of shipment, the company shall batch-process the inventory at the end of the month to determine the inventory, and then calculate the cost of sales by the three-part method (beginning of month + end of month purchase - end of month balance) to determine the net profit.

Revaluation of property, plant and equipment (manual response)

IFRS requires property, plant and equipment to be revalued every fiscal year to review the depreciation method and useful life. For example, when calculating the value of a vehicle at the time of inheritance, the value of the vehicle may be zero under the tax law, but the market sales value may be 200,000 yen. In Japan, the tax law standard is also adopted for accounting purposes and revaluation is not carried out regularly, so regular revaluation will reduce these cases. However, this is more of an operational problem rather than a correction in the accounting system.

A statement of cash flow (direct method) is required

In Indonesia, cash flow statements are not required and are often not created, but when generated from the system, the direct method of retrieving data from GL using the cash flow code set at the time of transaction entry as a key can be easily implemented.

multi-base ledger

Taxes will remain based on each country's own standards, but the consolidated financial statements will be IFRS-compliant (with emphasis on B/S). Although IFRS compliance is obligatory for investors and creditors in accounting, it is not always possible for the tax office to comply with this.

Therefore, it is ideal that the accounting system implements a multi-basis ledger function, specifically the ability to separate and manage the accounting journal data and select whether to combine them at the time of output.