Statement of Account in Singapore: Definition & How to Prepare

If you’re a business owner, self-employed, a sole proprietor, or part of a partnership, you’ve likely encountered the term Statement of Account. But what exactly is it, and why does it matter? Whether you are running a small business or managing a professional practice, preparing a statement of account is not just a good habit—it’s a legal requirement in Singapore.

In this guide, we’ll break down what a statement of account includes, when it needs to be certified, and what to do if your revenue crosses certain thresholds.

A business statement of account is a detailed financial statement that outlines all financial transactions conducted by the business over a specific period, often covering a date range like a fiscal year or quarter. It typically includes revenues, expenses, profits, losses, assets, liabilities, and other financial activities. This document provides a snapshot of the business's financial health and performance, helping business owners, stakeholders, and regulators understand its financial position.

Think of it as an account summary of your business’s financial information, giving you and the authorities a clear picture of your business's financial standing.

This document is crucial for financial planning, cash flow management, tax compliance, and decision-making. It ensures transparency and accountability in the business's financial transactions, helping business owners keep track of their account activity.

If a business's revenue exceeds SGD 500,000, a certified statement of account must be prepared. This means the statement must be signed by the self-employed individual, sole proprietor, or partner, certifying that it is accurate and complete. The certified statement of account must be submitted during e-filing. If e-filing is not possible, it must be mailed to the Inland Revenue Authority of Singapore (IRAS).

For businesses with revenue below SGD 500,000, submitting a certified statement of account to IRAS is not required. However, the self-employed individual, sole proprietor, or partner must still prepare the statement and maintain proper records of all business transactions, as IRAS may request these documents for verification purposes.

Preparing a statement of account involves compiling and organising your business’s financial records into two key components:

• Profit and Loss Account (P&L): This reflects your business’s financial performance over a specific period by summarising revenue, expenses, and net profit or loss.
• Balance Sheet: This provides a snapshot of your business’s financial position at a specific point in time by detailing your assets (e.g., cash, inventory, equipment), liabilities (such as loans or taxes), and equity. 

You can prepare a statement of account by yourself by engaging an accounting professional or using accounting software to assist you in preparing a statement of account. Many accounting software options allow you to track transaction history, generate sales invoices, and even prepare balance sheets for easier reporting.

If you’re doing it yourself, follow these steps:

1. Gather Financial Records: Collect all invoices, receipts, bank statements, and payroll records for the reporting period.
2. Organise Transactions: Categorise income and expenses into appropriate accounts, such as rent, utilities, or sales.
3. Record Entries: Use accounting software or manual ledgers to record all transactions systematically.
4. Generate the P&L and Balance Sheet: Summarise the income and expenses for the P&L account and compile assets, liabilities, and equity into the balance sheet.
5. Reconcile Accounts: Ensure all recorded transactions match bank statements and other financial records.
6. Review and Finalise: Double-check for accuracy and ensure all calculations are correct.

The Inland Revenue Authority of Singapore (IRAS) has prepared guides and working sheets for Sole Proprietorship and Partnership on their website. By following the working sheets, you will be able to easily prepare your statement of account.[1]

Here are some pointers on preparing a statement of account.

If your Profit & Loss Account includes expenses categorised under broad terms like "General," "Operating," "Miscellaneous," or "Others," you must provide a detailed breakdown. Clearly describe each expense and specify the corresponding amount for transparency.

Keep in mind the following:

• Private and capital expenses should not be included, as they are not considered allowable business expenses.
• If disallowable expenses were mistakenly included, these amounts must be added to the net accounting profit or loss to determine the Adjusted Profit or Loss.

Ensure that private, domestic, and capital expenses are excluded from your Profit & Loss Account, as they are not allowable business expenses.[2]

If any disallowable expenses have been mistakenly included, you must add these amounts back to the net accounting profit or loss to calculate the Adjusted Profit or Loss.

Part of managing your statement of account involves keeping track of outstanding balances and unpaid invoices. If your business issues sales invoices or receives payments via credit card, it's crucial to keep a detailed record of these transactions. Your bank statement will provide insight into any balance due on payments while tracking invoice amounts and outstanding payments will help ensure that your customer accounts are up-to-date.

For example, if credit notes are issued, these should be reflected as part of the account activity, adjusting the amount due for that transaction.

If your business handles payments via bank account transfers or credit cards, it’s important to reconcile your bank accounts regularly with your statement of account. This ensures that every debit and credit transaction is recorded properly and any discrepancies can be addressed in a timely manner.

For ease, you can use a template provided by your accounting software to match bank account statements with your business’s account activity.

A well-prepared statement of account also helps manage cash flow efficiently. Monthly statements can highlight any balance due from customers or suppliers and track overdue payments. Keeping these monthly statements ensures you can address outstanding balances before they affect your business operations.

In addition, your statement of account helps monitor remittance activities and better plan for late payments or outstanding payments. Tracking this information will provide a clearer view of your business's financial health.

By maintaining accurate statements of accounts, business owners can ensure their business remains financially healthy, compliant with regulations, and transparent for auditing purposes.

In conclusion, preparing a statement of account is a vital practice for business owners in Singapore, whether you’re self-employed, a sole proprietor, or part of a partnership. It ensures that your business complies with local regulations and provides a clear view of your financial transactions. By keeping accurate bookkeeping records, you can easily track your current balance, understand your outstanding payments, and stay on top of your due date for tax filing and submissions.