The financial statements our software produced came back covered in pencil. The accountant went through them 1 page at a time, marked every place that needed changing, and returned the paper itself to the office. Not 1 figure was wrong. It was still a set of pages that could not be filed. That is what I am writing about today.
KAZENA Books is ledger software. You enter the daily journals, watch the balances, and get the monthly figures out of it. But once a year those figures have to leave the ledger and become financial statements in a prescribed form. Here they go to the SEC. The accountant is the one who files them; what we hand over is the material. The material being correct and the material being in filable shape turned out to be 2 different jobs. I had thought they were the same job.
The correct part was already done. That company's year came to 4,180 journal entries, and the trial balance came out with debits and credits 0 pesos apart. The months had been reconciled as they went. So I treated adding the export as printing the balances in a list. I thought the order they were listed in was ours to decide.
It was not. The form decides the order. Assets, then liabilities, then equity, and assets and liabilities each split into current and non-current. Our accounts carried only 5 types: asset, liability, equity, revenue, expense. With nothing to say current or non-current, the export put everything into current. On the paper that came back, a loan repayable over 3 years, 1,450,000 pesos of it, was sitting in the column for what is due within 1 year. The amount is right. The box it sits in is not.
A quieter mistake sat on the same page. The total did not agree. On screen we hold centavos; on paper we print whole pesos. Each line was rounded as it printed, while the total was computed from the unrounded values. So adding the printed lines does not give you the printed total. 2 pesos out on the balance sheet, 3 on the income statement.
2 pesos looks small and is not. Whoever receives the paper adds the column from the top. If it does not agree, they start looking for the line that is wrong, and they do not stop until they have been through all of it. And the remedy is not to print more decimals. The paper that is filed is in whole pesos, so the rounding has to happen before the total, and the total has to be the sum of the rounded lines. Then you decide, on the accounting side, which line absorbs the difference that creates. It was not a question of how numbers are shown but of where the rounding comes in the order.
The prior-year column was missing too. The form wants last year beside this year. Our export had 1 column. And that company's ledger only had 8 months of history inside Books. You cannot produce what you do not hold. The prior-year figures went in by hand, entered by the accountant from the spreadsheets they used before. That is not our software being wrong, it is our software not having it, and what was wrong was that I did not say so first.
Then there were the statements we had not produced at all. The form asks for a set, not a page. We produced the balance sheet and the income statement. The changes in equity, the cash flows and the notes, we did not. The notes are prose; they do not come out of the ledger figures. I had produced half of a set and written in the handover document that the export was finished.
There is 1 more thing we stopped. We had been trying to produce the GIS from the same feature. The number of stockholders, the number of shares, the officers. None of it is in the ledger. However far you walk through the journals, those figures do not come out. I stopped partway and took it off the screen. Not everything a filing needs is an accounting figure, and I learned that while making the thing.
Because we had settled on a way to count it, I can say in numbers how much better it got. On the first version I handed over, the accountant retyped 212 lines out of 240 by hand. On the second version, 41. On the third, 0. My estimate was wrong. I had it at 4 days and it took 19, and 5 of those went on writing the export itself. The rest went on reading the returned paper 1 line at a time and asking the accountant why each mark was there.
On the software side we changed 3 things. First, each account now carries which line of the statements it belongs to, and whether it is current or non-current. The type alone does not reach the form. Second, rounding happens at the line, and the total is the sum of the rounded lines; where the difference goes is settled too. Third, the export puts the prior year beside the current one, and for a period the ledger does not hold in full it prints that it does not hold it, instead of printing a partial column. I passed it to the engineer on the KAZENA side as well. The form on their side has a different order and a different split, so the only part that carries over is the shape of it: let the account carry the form.
What I had confused was that the ledger and the form answer different questions. The ledger answers what happened. The form answers what happened, in an order somebody else decided. A figure that is right in the wrong box is not right yet. And you cannot make a feature that fills in what you do not hold. All you can make is saying, up front, that you do not hold it. Looking at a page with 0 pencil marks on it, I finally felt we had handed over the material.
One thing to be clear about. I am not a tax practitioner. This is a record of work on our own software, and it is not enough as an explanation of financial statements or filing rules. Any decision about which form to file, when, or how it should be prepared, please confirm with an accountant or another professional.