#9 Filing Corporate Taxes and Closing the Books Without an Accountant

Opening

Hi.
I'm Haruyoshi Hattori, founder of coiai, in my first year running the company.

coiai is an IT company that builds systems and products with technology at the core.

Every Monday, I use this show to share what running a startup is really like.

This time I'll be talking about "accounting and tax filing."

On accounting

I'm not an accounting professional, so please take this with a grain of salt.
This episode is aimed at people filing their company's accounts and taxes for the first time. Think of it less as a how-to guide and more as one person's personal account, and I'd be grateful if you listen to it in that spirit.

Also, if you've just started your company and have absolutely no idea what you're doing, I'd recommend visiting your prefecture's startup support center.

Prerequisites

As a baseline, here's the accounting knowledge I think it's good to have going in:

• Accrual basis accounting
  • The rule that expenses and revenue are recognized at the point a transaction occurs
• Debits and credits
• Depreciation
• General ledger
• Balance sheet and income statement (BS/PL)
  I think that about covers it. Once you know these, you can pick up the rest just by using accounting software.
  I don't personally hold a bookkeeping certification, but I had read some accounting and bookkeeping textbooks from the library beforehand. That level of knowledge was enough to get me through preparing the financial statements and filing.

If you're not sure about something, it's fine to just ask ChatGPT. At first I tried to have Atlas handle the whole thing, but it wasn't quite there yet, ha.

What to prepare

A Windows PC
A My Number card reader
Accounting software
Zenryoku Houjinzei (a corporate tax filing tool)
Receipts

Managing receipts

I tried a few different filing methods, but pasting them onto A4 sheets of paper turned out to be the best approach.
Apparently some people use scrapbooks, but the A4-sheet method costs nothing, so I'd recommend it.

Things to do right after founding the company

Opening a bank account

It starts with opening a bank account and depositing your capital.
You can pick whichever bank you like.

For accounting purposes, what you need is your monthly statement.
It also helps if the bank can be linked directly to the accounting software mentioned below.

I personally use Sumitomo Mitsui Banking Corporation, which has a service called Value Door that lets me check monthly statements online — it's been genuinely useful.

Setting up accounting software

Managing credit card statements and receipts is much easier with accounting software.
Once you get the hang of it, you might be able to get by with a spreadsheet or Excel instead.
But accounting software lets you go all the way through to preparing your financial statements in one consistent flow, which makes things a lot easier.

When you found a company and decide to handle the accounting software yourself, the options that generally come to mind are:

• Yayoi Kaikei (desktop)
• Yayoi Kaikei NEXT
• freee
  I think those are the three main ones.
  If I'm being completely honest, I think Yayoi Kaikei's desktop version and freee offer the best value for money.
  The reason I picked these two is that both let you go all the way from preparing financial statements through to filing. With freee, you do have to move across different services within the freee ecosystem, but it's doable.
  Yayoi Kaikei NEXT only takes you as far as preparing the financial statements — it doesn't support filing.
  All of them cost roughly ¥50,000 a year.

Since this is coiai's first fiscal year, we signed up for Yayoi Kaikei NEXT, the web app, because the UI seemed easy to understand — only to later realize that the desktop version of Yayoi Kaikei actually has more features…

Closing the year and preparing financial statements

Once all your journal entries are done, you close out the fiscal year.
The "fiscal year-end" is the point at which a company closes its books.
For Japanese corporations, December 31 or March 31 tend to be the most common fiscal year-end dates.
We use December 31.
You have to file within two months of the fiscal year-end, so in my case, that means filing by the end of February.

Basically, as long as you carefully categorize money going out and money coming in, and the final numbers match your bank balance as of December 31, you're in good shape.

In my case, I trusted the accounting software's bank integration a bit too much, and it turned out there were some gaps, which created discrepancies — I had a hard time closing the books because of it.
So I went back to the monthly bank statements I mentioned earlier, downloaded them all in bulk as PDFs from Value Door, and checked through them, which is how I discovered some unrecorded entries. That's how I finally managed to close the books.

If you're using accounting software, the financial statements should be generated automatically once you close out the fiscal year.
Those statements include your balance sheet and income statement information.

Filing

Once your financial statements are ready, you need to export the data from your accounting software and file your return.

I used a piece of software called Zenryoku Houjinzei ("All-Out Corporate Tax"). If you follow its guidance, I think basically anyone can get through it, but here's what's involved:

• Shareholder information (address, shares held, etc.)
• Journal entry files, trial balance
• Fixed asset ledger (this is probably where incorporation expenses go)
• Consumption tax filing (required if you're registered for the invoice system or your revenue exceeds ¥10 million)
• Preparing the corporate tax return
  • Registering your bank account and confirming that the trial balance matches your actual bank balance
• Registering revenue you haven't been paid yet
  • Notes receivable
  • Accounts receivable
• Suspense payments
  • Money you've paid out but haven't yet finalized what it's for
• Schedule of loans receivable and interest received
  • A schedule for when the company has lent money to someone (including officers)
• Schedule of inventory (goods, finished products, semi-finished products, work in process, raw materials, supplies)
  • A schedule of the company's inventory holdings
• Schedule of securities
  • A schedule of any stocks or investment products the company holds
• Schedule of fixed assets (land)
• Schedule of notes payable
  • Money you've promised to pay in the future
• Schedule of accounts payable (unpaid amounts / accrued expenses)
  • If you use a credit card, the unbilled amount counts as a payable, so you need an entry that offsets it once the card is actually charged
  • If you haven't offset amounts you personally covered on the company's behalf, they'll show up here
  • Any unpaid portion of officer compensation also goes here
• Schedule of unpaid dividends and unpaid officer bonuses
• Schedule of suspense receipts
  • Money you've received but haven't yet finalized what it's for
• Schedule of borrowings and interest paid
  • Money the company has borrowed
  • From a bank or as financing
• Officer register
  • The officer compensation you've set — meaning the amount you're scheduled to receive, not necessarily the amount actually received
  • Reference links in case you ended up receiving compensation irregularly
  • https://search-advisors.freee.co.jp/qa/accounting/670
  • https://homare.tax/unpaid-executive-compensation-expenses/
• Schedule of rent
  • Your company's rent
• Schedule of mid-term payments for rights and similar fees
  • Franchise membership fees
• Schedule of royalties for industrial property rights
  • Royalties for intellectual property such as patents and trademarks
• Schedule of miscellaneous income
  • Secondary income that isn't part of your core business revenue
  • Credit card point rewards, for example
• Schedule of miscellaneous losses
  • Things like foreign exchange losses
• Breakdown of entertainment expenses
  • Spending aimed at maintaining relationships with business partners
  • For small and medium-size corporations (capital of ¥100 million or less), you can choose whichever is more favorable:
  • ① Fully deductible up to ¥8 million per year, or
  • ② 50% of food and drink expenses deductible
  • whichever benefits you more.
• Status of corporate tax payments
  • Only fill this in if you've actually paid corporate tax, resident tax, or business tax during this period
• Schedule for computing taxable income
  • An adjustment table that converts your accounting profit into taxable profit
• Schedule for computing retained earnings and capital
  • A table that organizes changes in retained earnings
    • How much is capital
    • How much is retained earnings carried forward
    • What's the net income (or loss) for the period
    • Were any dividends paid
• Computation of the tax reserve
  • An estimated liability for taxes you'll pay in the future
• Local tax rate settings
• Preparing the corporate business overview statement
  • A description of your business overview and accounting practices, among other things

Filing your notifications

Setting up e-Tax

Technically you can access it through Safari on a Mac, but it's very awkward to use, so it's better to do this on Windows.

I kept getting stuck at "the e-Tax software is configuring the installation of new software," and couldn't get the software to download — booting Windows into Safe Mode fixed it.
I also couldn't file directly from the Zenryoku Houjinzei software because of an e-Tax login error, so I exported an XTX file from Zenryoku Houjinzei, loaded it into e-Tax, and completed the filing that way.

Setting up eLTAX

This is needed for filing local taxes.
You'll need a My Number card reader.
You'll also need the desktop app, which means you have no choice but to use Windows — sadly, since I normally work on a Mac.

You first submit a usage application. Following the on-screen instructions got me through it without issues.

For eLTAX, I also handled everything through the Zenryoku Houjinzei software.

Ending

All right, that about wraps up this week.

coiai works on web, XR, core systems, and on-premise AI adoption support.
We can take on pretty much anything, so if you've been turned down elsewhere or gotten a quote that felt too high, feel free to reach out — quotes are free!
See you again next Monday! Subscribe to the channel and I hope you'll come listen again next week!
Thank you!