{"id":57113,"date":"2015-12-08T10:54:38","date_gmt":"2015-12-08T03:54:38","guid":{"rendered":"https:\/\/bahtera.jp\/revaluation-discrepancy\/"},"modified":"2025-03-20T14:16:21","modified_gmt":"2025-03-20T07:16:21","slug":"revaluation-discrepancy","status":"publish","type":"post","link":"https:\/\/bahtera.jp\/en\/revaluation-discrepancy\/","title":{"rendered":"Data Discrepancies Prone to Occur at Month-End in Indonesian Business Systems"},"content":{"rendered":"

At Japanese manufacturing companies in Indonesia, data discrepancies arising during the operation of business systems are typically mismatches between accounts receivable\/payable balances and general ledger (GL) balances, discrepancies between accounts receivable listings and sales, or issues related to functional integration within the business system.
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Accounting System in Indonesia<\/p>\r\n\t\t\t\t\t\t\t\r\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t

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The cloudification of accounting systems is advancing in Indonesia, with the three major local cloud systemsAccurate, Zahir, and Jurnalleading the market. However, in reality, it is said that fewer than 8% of domestic companies have implemented accounting systems. This is why new cloud-based accounting systems continue to be launched in what might seem like an already saturated Indonesian market. It suggests that both domestic and international IT startups see significant potential for cloud accounting systems to expand their market share locally. In Indonesia, automated journal entries due to the widespread use of accounting systems have become commonplace, and over the … <\/p>\n\t\t\t\t\t\t\t\t<\/div>\r\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t

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Cases Where Data Discrepancies Occur Between Departments<\/h2>\n

In a business system, each department\u2019s staff uses only the functions necessary for their tasks, with input information relayed from upstream to downstream. During this process, data discrepancies between departments can occur.
\nHowever, these discrepancies are rarely due to system malfunctions. Most often, they stem from differences in input\/output methods or timing across departments. Analysis typically reveals the following common causes:<\/p>\n

Differences Between Accounts Receivable (A\/R) and Accounts Payable (A\/P) Balances on the General Ledger (G\/L) and Aging Reports<\/h3>\n

Theoretically, the beginning-of-month A\/R and A\/P balances carried over on the G\/L should match the previous month-end balances on the Aging Report, but in practice, they rarely do.<\/p>\n

\n
\n
    \n
  1. A\/P and A\/R are entered directly into the G\/L
    \n\u21d2 This occurs when journal entries for debit notes (for discounts) or credit notes (for price increases) are input directly into the G\/L.<\/li>\n
  2. A\/P and A\/R journal entries are generated at the approval stage before posting
    \n\u21d2 You need to check for approved but unposted A\/P and A\/R transactions during month-end closing.<\/li>\n<\/ol>\n<\/div>\n<\/div>\n

    When A\/R and A\/P Span Multiple Departments<\/h3>\n

    Data discrepancies in business systems often come to light when A\/P and A\/R balances don\u2019t match G\/L balances. This can manifest as either a mismatch in total amounts or a match in total amounts but discrepancies in totals by vendor\/customer.
    \nTo align A\/P and A\/R amounts by vendor\/customer, similar to departmental asset transfers, accounts are split, and offsetting journal entries are created with a cutoff at a specific month-end.<\/p>\n

    \n
    \n
      \n
    • (Debit) A\/P (Vendor Code A) 10\u3000\u3000\u3000\u3000(Credit) A\/P (Vendor Code M) 30<\/li>\n
    • (Debit) A\/P (Vendor Code B) 10<\/li>\n
    • (Debit) A\/P (Vendor Code C) 10<\/li>\n<\/ul>\n<\/div>\n<\/div>\n\n

      A\/R and Sales Mismatch When Advances Are Processed Under the Completed Contract Method<\/h3>\n

      A sales representative might try to match this month\u2019s sales to specific A\/R entries or trace back from A\/R to orders to identify which orders generated the sales. However, the sales list on the G\/L doesn\u2019t necessarily match the A\/R list for that month.
      \nReturns or discounts reported by sales staff can be adjusted from the original A\/R data using a credit note. However, exchange gains\/losses on foreign currency A\/R or tax adjustments are entered by accounting staff at their discretion via G\/L transfer vouchers, creating discrepancies between A\/R data and G\/L A\/R balances.
      \nAdditionally, when services are processed under the completed contract method, customer advances are recorded in a Down Payment account rather than Sales. If these become sales the following month, comparing sales and A\/R on a monthly basis won\u2019t align (A\/R will be overstated).<\/p>\n

      \n
      \n
        \n
      • Upon Receiving Advance Payment
        \n(Debit) A\/R 100\u3000\u3000\u3000\u3000(Credit) Down Payment 100<\/li>\n
      • Upon Contract Completion
        \n(Debit) A\/R 40\u3000\u3000\u3000\u3000(Credit) Sales 40
        \n(Debit) Down Payment 100\u3000\u3000\u3000\u3000(Credit) Sales 100<\/li>\n<\/ul>\n<\/div>\n<\/div>\n

        Data Adjustments After Month-End Closing<\/h3>\n

        It\u2019s common to perform foreign exchange revaluation at month-end, complete the closing process, and then realize, \u201cOops, I forgot to input this paid invoice!\u201d
        \nIn such cases, you must cancel the closing process, undo the revaluation, process the invoice settlement, re-run the revaluation, and redo the closing.
        \nIf this procedure isn\u2019t clear and the invoice correction is made without canceling the revaluation, the correction won\u2019t be reflected in the revalued amount.<\/p>\n

        \n
        \n
          \n
        1. November 30 USD A\/R balance in rupiah: 100<\/li>\n
        2. November 30 revalued balance in rupiah: 110<\/li>\n
        3. Instead of correcting against 100, the correction is applied to 110.<\/li>\n<\/ol>\n<\/div>\n<\/div>\n

          Closing Delays Leading to Premature A\/R and A\/P Settlement Entries<\/h3>\n

          Foreign exchange revaluation adjusts A\/P balances at month-end rates, but since closing often slips into the next month, clearing transactions entered in the interim alter the month-end A\/P balance.<\/p>\n

          \n
          \n
            \n
          1. November 30 balance in rupiah: 100<\/li>\n
          2. Balance after December 1 settlement entry: 90<\/li>\n
          3. Revaluation is applied to 90 instead of the intended 100.<\/li>\n<\/ol>\n<\/div>\n<\/div>\n

            Possible Countermeasures<\/h2>\n

            Separating Realized and Unrealized Accounts<\/h3>\n

            Foreign exchange gains\/losses come in two forms: realized gains\/losses based on the difference between the rate at A\/P inception and settlement, and unrealized gains\/losses from month-end revaluation. Without separating these into distinct accounts, tracing the transactions causing the gains\/losses becomes difficult.<\/p>\n

            \n
            \n
              \n
            1. Forex Gain-Realized<\/li>\n
            2. Forex Loss-Realized<\/li>\n
            3. Forex Gain-Unrealized<\/li>\n
            4. Forex Loss-Unrealized<\/li>\n<\/ol>\n<\/div>\n<\/div>\n


              \nThe system distinguishes whether forex gain\/loss entries stem from settlements or revaluations, but in general accounting, filtering is typically limited to accounts or vendors\/customers. Splitting accounts as above is preferable.<\/p>\n

              Clarifying Procedures for Irregular Adjustments<\/h3>\n

              Post-closing corrections to A\/R and A\/P data must include canceling the revaluation; otherwise, the adjustments won\u2019t reflect in the month-end valuation. Clear procedures for irregular adjustments are essential.<\/p>\n

              Accounting Audits by External Auditors<\/h2>\n

              Generally, \u201caudit\u201d refers to accounting audits by audit firms, but statutory audits are mandatory only for \u201clarge companies\u201d as defined by company law.
              \nThis definition\u2014\u201ccompanies with capital of 500 million yen or more or liabilities of 20 billion yen or more\u201d\u2014means a company may become subject to audits as it grows or fall out of scope as it declines.
              \nEven unlisted companies must undergo audits by accounting auditors (audit firms or CPAs) under Company Law Article 328. Failure by applicable large companies to conduct statutory audits is a legal violation subject to fines, though in practice, enforcement seems gray.
              \nIn Indonesia, foreign-invested companies (PMA) are all treated as large companies, so even those considered SMEs in Japan must undergo external audits if they are PMA.
              \nAs Peter Drucker might say, companies are public instruments of society. However, deteriorating financial statements affect banking reviews, stock prices, and bidding conditions, fostering a habit of crafting statements in the gray zone\u2014\u201cHow to black-box it?\u201d or \u201cHow to make it look clean?\u201d\u2014with forced efforts piling up. When issues like Toshiba\u2019s surface, the vague term \u201cinappropriate accounting\u201d emerges.<\/p>\n

              External Operational Audits and Internal Audits<\/h2>\n

              Traditionally, audits meant external accounting audits, but since J-SOX (rules on internal controls in the 2006 Financial Instruments and Exchange Act), operational audits evaluating internal compliance have gained social importance.
              \nOperational audits cover business activities beyond accounting (purchasing, production, logistics, sales) and organizational systems, ultimately linking\u2014directly or indirectly\u2014to ensuring financial statement integrity for shareholder protection.<\/p>\n

              \n
              \n
                \n
              1. External Accounting Audit: Directly ensures financial statement integrity.<\/li>\n
              2. External Operational Audit: Ensures proper compliance with internal controls per ISO or J-SOX.<\/li>\n
              3. Internal Audit: Ensures proper compliance with internal controls per ISO or J-SOX.<\/li>\n<\/ol>\n<\/div>\n<\/div>\n

                With today\u2019s systemized operations, IT controls are essential for internal control evaluations. In Indonesia, operational audits of ERP systems focus on these three points:<\/p>\n

                \n
                \n
                  \n
                1. Is the approval workflow appropriate?<\/li>\n
                2. Are system access rights properly configured?<\/li>\n
                3. Are operational and procedure manuals documented?<\/li>\n<\/ol>\n<\/div>\n<\/div>\n

                  Work of Accounting Consultant Firms in Indonesia<\/h2>\n

                  Many Japanese manufacturing firms in Indonesia contract accounting consultant firms for bookkeeping or advisory services. When implementing accounting systems, the financial statements output after month-end closing are inevitably cross-checked with those prepared by the consultant firm.
                  \nThe beginning balances needed for system go-live (a term often used in Indonesia) are imported or entered via transfer vouchers based on the trial balance prepared by the consultant firm.
                  \nIndonesian accounting consultant firms, regardless of size, generally handle:<\/p>\n

                  \n
                  \n
                    \n
                  1. External audits (accounting and operational)<\/li>\n
                  2. Bookkeeping and payroll outsourcing<\/li>\n
                  3. Tax support (PPh, PPN, customs, etc.)<\/li>\n
                  4. Visa and company setup assistance<\/li>\n<\/ol>\n<\/div>\n<\/div>\n

                    The most familiar to Japanese firms is JAC (Japan Asia Consultant). I keep three books by their representative (on company management, tax, and accounting) on my desk as go-to references\u2014my home desk is small, after all\u2026<\/p>\n

                    Data from Accounting Consultant Firms Needed for Accounting System Implementation<\/h2>\n

                    When implementing an accounting system for a client contracted with a consultant firm, issues always arise, which I informally call the \u201cthree mismatches\u201d:<\/p>\n

                    \n
                    \n
                      \n
                    1. Mismatch in beginning balances: Occurs when data is revised locally after submission.<\/li>\n
                    2. Mismatch in accounts: Confuses operators during mid-month data entry.<\/li>\n
                    3. Mismatch in timing of beginning balance alignment: Impacts system implementation schedules.<\/li>\n<\/ol>\n<\/div>\n<\/div>\n

                      If a stray invoice is discovered after submitting data to the consultant firm and the correction request isn\u2019t processed in time, the internal invoice-based A\/R and A\/P balances won\u2019t match the GL balances sent by the consultant firm, requiring time-consuming root cause analysis.
                      \nSince the consultant firm\u2019s task is to prepare accurate financial statements per Indonesian company law, managing multiple clients means using standardized accounts to reduce workload\u2014an unavoidable reality.
                      \nHowever, if mapping to local accounts is inadequate, accounting staff struggle to classify gray-area transactions, making month-end account balance reconciliations\u2014and thus closing\u2014impossible.
                      \nMoreover, finalized data from the previous month\u2019s closing arrives around the 20th of the following month at the earliest, complicating schedule management for system implementation project managers.<\/p>\n","protected":false},"excerpt":{"rendered":"

                      At Japanese manufacturing companies in Indonesia, data discrepancies arising during the operation of business systems are typically mismatches between accounts receivable\/payable balances and general ledger (GL) balances, discrepancies between accounts receivable listings and sales, or issues related to functional integration within the business system.<\/p>\n","protected":false},"author":2,"featured_media":81745,"parent":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[683],"tags":[],"class_list":["post-57113","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-indonesia-accounting-tax-rule"],"_links":{"self":[{"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/posts\/57113","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/comments?post=57113"}],"version-history":[{"count":0,"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/posts\/57113\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/media\/81745"}],"wp:attachment":[{"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/media?parent=57113"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/categories?post=57113"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bahtera.jp\/en\/wp-json\/wp\/v2\/tags?post=57113"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}