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Accounting

China Accounting Standards

What are accounting standards?

Accounting standards consist of a set of principles and guidelines governing various financial transactions. The main objective of accounting standards is to prescribe recognition, measurement, presentation and disclosure requirements for significant transactions and events in general purpose financial statements. These statements provide information about performance, condition and cash flow that is useful for various users to make financial decisions. Users of financial statements include existing and potential investors, employees, lenders, suppliers and other trade creditors, customers, governments and their agencies and the public. They use financial statements to meet their diverse needs for information.

The most important driving force in the development of international accounting standards is the International Accounting Standards Board (IASB), an independent accounting standard-setting body of the International Financial Reporting Standards Foundation. The broad objective of the IASB is to further harmonize accounting practices by developing accounting standards and to promote their acceptance worldwide. The International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) are widely used as a standard to measure the financial health of enterprises. This framework is highly reliable and of high quality, but it is lengthy and complex.

China Accounting Standards (CAS)

  • Background：China's Enterprise Accounting Standards are formulated and promulgated by the Ministry of Finance of China. The accounting standards system has been gradually improved since 2006, aiming to align with the International Financial Reporting Standards while adapting to the Chinese economic environment and legal system.
  • Structure：CAS consists of three parts: basic standards, specific standards and application guidelines. Basic standards establish the basic principles and methods of accounting, while specific standards cover various aspects of financial reporting.
  • Main Features：Convergence with IFRS: Since 2007, CAS has begun to converge with IFRS, minimizing the differences between the two.
  • Localization Adjustment：Although converging with IFRS, some localized adjustments have been made in certain areas (such as government subsidies, asset impairment, etc.).
  • Scope of Application：All enterprises registered in China, including listed companies and some large and medium-sized enterprises.

In recent years, China's enterprise accounting standards have continued to converge with International Financial Reporting Standards. Since 2017, China has successively revised and issued a number of standards, including "Recognition and Measurement of Financial Instruments," "Transfer of Financial Assets," "Hedging Accounting," "Financial Instrument Presentation," "Non-current Assets Held for Sale, Disposal Groups and Discontinued Operations," "Government Grants," "Revenue," "Leases," "Non-monetary Asset Exchanges," "Debt Restructuring" and "Insurance Contracts," and has continuously revised the format of financial statements according to changes in the standards. This has further reduced the differences between China's enterprise accounting standards and International Financial Reporting Standards.

Accounting Vouchers

Accounting vouchers are written proof recording the occurrence or completion of economic transactions. They are the basis for recording in ledgers and include both paper and electronic accounting vouchers.

According to the preparation procedures and uses, accounting vouchers are divided into original vouchers and bookkeeping vouchers.

Bookkeeping Requirements

Accounting Basic Work Standards

Article 24. The accounting of each unit must be based on the actually occurred economic business matters, and carried out in accordance with the prescribed accounting methods, ensuring the consistency of accounting information caliber, mutual comparability and consistency of accounting methods in the past and present periods.

Article 25 The fiscal year runs from January 1 to December 31 of the Gregorian calendar.

Article 26 Accounting is based on the Renminbi as the functional currency. Units whose main business income and expenditure are in currencies other than the Renminbi may select one of these currencies as the functional currency, but the financial accounting reports prepared must be converted into Renminbi. Financial accounting reports submitted to relevant domestic departments by overseas units must be converted into Renminbi.

Article 27 The setting and use of accounting items by various units must comply with the provisions of the national unified accounting system.

Article 28 The content and requirements of accounting vouchers, accounting books, financial accounting reports, and other accounting materials must comply with the provisions of the national unified accounting system. No unit or individual may forge or alter accounting vouchers, accounting books, and other accounting materials, set up private accounting books, or provide false financial accounting reports.

Article 29 The format of financial accounting reports provided by various units to the outside world is uniformly stipulated by the Ministry of Finance of the State Council.

Article 30 When using accounting software for accounting, the accounting software and the accounting vouchers, accounting books, financial accounting reports, and other accounting materials generated by it must comply with the relevant provisions of the "Accounting Informatization Work Standards" and the "Basic Functions and Service Standards for Accounting Software".

Article 31 The language used in accounting records should be Chinese. In ethnic autonomous regions, accounting records may simultaneously use a commonly used ethnic language. In the People's Republic of China, accounting records of foreign-invested enterprises, foreign enterprises, and other foreign organizations may simultaneously use a foreign language.

Article 32 Accounting vouchers, accounting books, financial accounting reports, and other accounting materials of various units should be established as archives and properly preserved. The requirements for establishing accounting archives, the retention period, and the destruction methods shall be implemented in accordance with the provisions of the "Accounting Archives Management Measures".

Company Accounting Services

Zhilin can customize accounting services to meet the actual needs of clients. Accounting services include:

Using professional accounting software, accounting services are provided according to the complexity and requirements of the accounts.

Establish accounting accounts and enter company's income and expenditure.

Compile the company's:

  • Balance Sheet
  • Profit and Loss Statement
  • Cash Flow Statement
  • Statement of Changes in Equity
  • Account Details
  • Prepare company financial reports

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