Every sole proprietor faces this dilemma at least once: should I use double-entry bookkeeping, or is simplified bookkeeping sufficient? As sales grow, new obligations may arise, and with software prices varying widely, making the choice difficult.
In this article How to accurately distinguish mandatory standards based on industry and sales revenueI have summarized the criteria for selecting a program based on actual situations. You will be able to avoid the mistake of using simplified bookkeeping when double-entry bookkeeping is mandatory, or conversely, using expensive software when simplified bookkeeping is sufficient.
Determining Double-Entry Bookkeeping Obligations Based on Industry and Sales Revenue
The first criterion for determining whether double-entry bookkeeping is mandatory is Previous year's salesHowever, even with the same sales revenue, the standards differ depending on the industry. The threshold is 300 million won for wholesale and retail trade, agriculture, mining, and real estate sales; 150 million won for manufacturing, restaurants, and construction; and 75 million won for professional, scientific, and technical services or real estate rental.
If this figure is exceeded, double-entry bookkeeping must be implemented starting the following year, but there is a point to note here. Professional business owners such as tax accountants or lawyers Exceptions to the double-entry bookkeeping obligation regardless of sales revenueC. This means that while you can apply for simplified bookkeeping if your sales are below the threshold during the early stages of your business, you must switch to it the moment you grow and exceed the standard.
| Industry classification | Mandatory double-entry bookkeeping standards |
|---|---|
| Wholesale and retail trade, agriculture, mining, real estate sales | 300 million won or more |
| manufacturing, restaurants, construction | 150 million won or more |
| Professional services, real estate rental | 75 million won or more |
If you do not meet the mandatory standards, you can apply for simplified bookkeeping. Although simplified bookkeeping is a much simpler format than double-entry bookkeeping, it has the advantage of allowing actual expenditures to be recognized as proof when filing.
How are Simplified Bookkeeping and Double-Entry Bookkeeping Different?
Simplified bookkeeping is a household accounting system that records expenses and income in chronological order, while double-entry bookkeeping is a method of recording the same transaction on both the debit and credit sides. The biggest difference in practice is Whether accounting knowledge is requiredC. Anyone can use simplified bookkeeping, but with double-entry bookkeeping, basic knowledge is required to properly classify items.
Applicants for simplified bookkeeping do not actually spend much time on it. It takes less than 5 minutes to record daily, and an additional 10 minutes or so to review on weekends. While it may take half a day to organize all transactions at the end of the year for comprehensive income tax filing, the task becomes much lighter for those who have consistently kept records.
Let's also keep in mind that filing simplified ledgers as double-entry bookkeeping brings with it a tax benefit called the bookkeeping tax credit.
If a business eligible for simplified bookkeeping files an estimated tax return, only the expense ratio specific to the industry is recognized, even if actual expenses are substantial. In contrast, filing with full bookkeeping allows the entire actual expenditure to be recognized as an expense by submitting supporting documentation. This is why taxes can vary significantly depending on the filing method, even for businesses of the same size.
Let's choose a program based on price and features.
There are various tax programs on the market, each differing in price and features. If you are a beginner MoneyPinIt is worth considering. Basic functions are free, and you only have to pay 30,000 to 80,000 won per case when reporting. While it offers the convenience of AI automatically classifying transactions, the downside is that its judgment can be incorrect.
If you want to manage the ledgers by hand and take care of the tax filing as well Easy ShopThis is the alternative. Simplified bookkeeping costs 15,400 won per month, and double-entry bookkeeping costs 24,200 won per month; filing costs an additional 55,000 won per year. Although the UI is somewhat clunky, the functionality is solid, making it suitable for those who prefer manual verification over automation.
If the business grows and you have employees and a lot of inventory eCount ERPYou might also want to consider [this]. It costs 40,000 won per month with an initial sign-up fee of 200,000 won, but it is a fixed price regardless of the number of employees, and allows you to manage inventory and distribution all in one place. Conversely Accounting NaraIt is specialized in automatically collecting banking and receipts, but tax filing must be done separately elsewhere.
Common Bookkeeping Mistakes and How to Avoid Them
If you are an obligor and use simplified bookkeeping or file an estimated tax return, a penalty for failure to keep proper records will be imposed. Furthermore, if an obligor fails to properly maintain double-entry bookkeeping or fails to file, even greater penalties will follow. To avoid this problem... First, accurately determine your standards of duty.You must do so and choose a method that suits it.
There are three most common mistakes in bookkeeping. First, omitting or incorrectly recording transactions by rushing to write at the end of the year. Second, failing to collect supporting documents for cash expenditures. Third, mixing business and personal expenses in records. To reduce these mistakes, the most important thing is to develop the habit of recording daily or at least once a week.
If uncertain expenses arise, it is best to mark them on the spot and sort them out before filing. Since you will likely need to consult a tax accountant or inquire with the National Tax Service anyway, organizing them in advance makes it much easier to handle later.
Now it's time to make the choice that suits me.
The standard practice is to first determine if you are obligated to use double-entry bookkeeping and select a program accordingly. If you are, it is crucial to choose a program you can use properly, no matter how inexpensive it is. After all, nothing is more expensive than avoiding penalties for failure to keep proper records and additional taxes.
If your business is small, you can test MoneyPin's automation; if you prefer manual management, you can start with EasyShop to keep things light for the first few months. The important thing is to record information consistently according to your obligations and ensure there are no omissions when filing. That is the surest way to avoid suffering losses due to tax issues later on.