Accounting services mean keeping a company's financial and tax records under a service contract: processing source documents, maintaining accounting registers, calculating taxes and payroll, preparing and filing financial statements and tax returns, and supporting the client through tax inspections. The Law of Ukraine "On Accounting and Financial Reporting in Ukraine" (Закон «Про бухгалтерський облік та фінансову звітність в Україні») expressly provides for this way of organising accounting, on an equal footing with an in-house accounts department.
Accounting services from a legal point of view
Law No. 996-XIV defines accounting itself as the process of identifying, measuring, recording, accumulating, summarising, storing and passing on information about an entity's activities to external and internal users for decision-making. Each company chooses how to organise its accounting, and Article 8 sets out four options of equal standing. Handing the books to an outside firm is a lawful form of organising accounting and fully meets the statutory requirements.
- creating an accountant position on the staff or setting up an accounts department headed by a chief accountant;
- using the services of an accounting specialist registered as an individual entrepreneur who operates without forming a legal entity;
- having the accounts kept under a contract by a centralised accounts office or by a company, business entity or self-employed person operating in accounting and/or audit;
- keeping the accounts personally as the owner or director; this option is not available to companies whose financial statements must be made public or to budget-funded institutions.
There are exceptions. A public-interest entity (підприємство, що становить суспільний інтерес) must set up an accounts department headed by a chief accountant with at least two staff members (this does not apply to non-state pension funds or collective investment institutions). Responsibility for organising accounting, for making sure every business transaction is recorded in source documents, and for keeping processed documents, registers and financial statements for the required period (at least three years) lies with the director or owner. The contractor does not take it over.
Signing is regulated separately. Under Article 11, where the accounts are kept by a firm operating in accounting and/or audit, the financial statements are signed by the client's director (or an authorised person) together with the director of the service provider or a person they authorise. The service provider's liability is determined by law and by the accounting services agreement, so you set the scope of work and the limits of liability yourself. Responsibility for filing and publishing the financial statements on time and in full still rests with the company's director or owner.
The full list of accounting services: eight areas of work
A standard engagement breaks down into eight areas, from day-to-day processing of source documents to the annual financial statements.
| Area of work | What is actually done | Frequency |
|---|---|---|
| Source documents | Receiving documents, checking mandatory details, preparing and storing source and summary accounting documents, and controlling document flow from the moment a document is drawn up until it goes to the archive | Ongoing, as transactions occur |
| Accounting policy and registers | Setting the accounting policy, choosing the form of accounting as a system of registers, additional accounts and analytical registers, document flow rules, and staff rights to sign documents | At the start, then reviewed as things change |
| Tax accounting | Recording income, expenses and other figures used to determine taxable items, based on source documents, registers and financial statements | Continuous |
| VAT | Issuing electronic tax invoices (податкові накладні), registering them in the Unified Register of Tax Invoices (ЄРПН), filing the VAT return and managing input VAT | Whenever tax liabilities arise |
| Payroll | Calculating and paying salaries, withholdings, and the tax report on income paid to individuals, tax withheld and the single social contribution (ЄСВ) accrued | Monthly / quarterly |
| Financial statements | Balance sheet, income statement, interim and annual statements and, where needed, consolidated statements and statements under international standards | Quarter, half-year, nine months, year |
| Stocktaking | Checking and documenting the existence, condition and valuation of assets and liabilities | As decided by the owner and whenever required by law |
| Dealing with the authorities | Filing reports, answering requests, preparing documents for inspections and supporting the client during inspections | As needed |
Source documents and registers: the foundation of the service
Under Article 9 of Law No. 996-XIV, business transactions are recorded on the basis of source documents. Summary accounting documents may be prepared from them to control and organise data processing. A document may be on paper or electronic, but it must contain the full set of mandatory details. If it does not, the transaction stalls and the tax treatment of it falls apart.
- the title of the document (form) and the date it was drawn up;
- the name of the company on whose behalf the document was drawn up;
- the nature and scale of the transaction and its unit of measurement;
- the positions and names of the people responsible for the transaction and for documenting it correctly;
- a handwritten signature or other data identifying the person who took part in the transaction.
Source documents generated automatically in electronic form by the software of an information and communication system may be used in accounting if they bear an electronic signature or seal. That is why setting up electronic document flow and signing keys is part of the service itself. Minor defects in documents are no reason to disregard a transaction, as long as they do not prevent identification of the person involved and the document shows the date, the company's name and the nature and scale of the transaction. The transactions themselves must be recorded in the accounting registers in the reporting period in which they took place.
The tax side is stricter. Article 44 of the Tax Code (Податковий кодекс) prohibits taxpayers from building figures in tax returns and customs declarations on data that is not supported by documents. A corporate income tax payer uses accounting and financial statement data on income, expenses and pre-tax profit to calculate its taxable base. Legal entities paying the single tax that meet the criteria of the third group keep simplified accounts of income and expenses under a method approved by the central executive body responsible for state financial policy.
Tax reporting: the deadlines an accountant has to meet
Filing deadlines are set by paragraph 49.18 of the Tax Code and depend on the base reporting period. A missed deadline turns straight into a financial cost.
- calendar month: within 20 calendar days after the last day of the reporting month;
- quarter or half-year: within 40 calendar days;
- year: within 60 calendar days, including the corporate income tax return, which is calculated on a cumulative basis for the year;
- year for personal income tax payers, including self-employed persons: by 1 May of the following year.
VAT deserves separate attention. If a business's total taxable supplies of goods and services over the last 12 calendar months exceed UAH 1,000,000 excluding VAT, it must register as a VAT payer, unless it pays the single tax in groups one to three. After that, on the date a tax liability arises, the business must issue an electronic tax invoice with a qualified electronic signature (or an advanced signature based on a qualified certificate) and register it in the Unified Register of Tax Invoices within the set deadline. Monitoring the threshold and registering invoices on time are a standard part of accounting services.
For payroll, payers of taxes and the single social contribution file a tax report on income paid to individuals, tax withheld and the single contribution accrued, within the deadlines set for a tax month. Individual entrepreneurs and people in independent professional practice file this report within the deadlines for a tax quarter, broken down by month.
Financial statements: the scope depends on the size category of the company
The set of financial statements depends on the company's size category under Article 2 of Law No. 996-XIV. The category is based on figures as at the date the annual statements for the previous year were prepared, and meeting at least two of the criteria is enough.
| Category | Total assets (carrying amount) | Net revenue | Average number of employees |
|---|---|---|---|
| Micro | up to EUR 350,000 inclusive | up to EUR 700,000 inclusive | up to 10 inclusive |
| Small | up to EUR 4 million inclusive | up to EUR 8 million inclusive | up to 50 inclusive |
| Medium | up to EUR 20 million inclusive | up to EUR 40 million inclusive | up to 250 inclusive |
| Large | over EUR 20 million | over EUR 40 million | over 250 |
Micro and small companies, non-business organisations, and branches and representative offices of foreign legal entities (except those required to report under international standards) prepare abridged financial statements consisting of a balance sheet and an income statement. Micro and small companies are fully exempt from filing a management report, and medium-sized companies may leave non-financial information out of it.
The reporting period is the calendar year; interim statements are prepared for the first quarter, the first half-year and nine months. A newly established company's first reporting period may be shorter than 12 months but no longer than 15. For a company in liquidation, the reporting period runs from the start of the reporting year to the date of the liquidation decision.
The following must report under International Financial Reporting Standards: public-interest entities, public joint-stock companies, authorised credit rating agencies, businesses in the extractive industries, parent companies of groups that include public-interest entities, parent companies of large groups that are not themselves large companies, and companies whose types of activity are listed by the Cabinet of Ministers. Everyone else decides for themselves whether IFRS makes sense, and preparing IFRS financial statements is a separate piece of work. Public-interest entities (except large companies that do not issue securities), public joint-stock companies, natural monopolies on the national market and businesses in the extractive industries publish their annual financial statements together with the auditor's report by 30 April of the following year; large companies that do not issue securities, and medium-sized companies, do so by 1 June. Published statements must stay on the company's website for at least six years unless the law sets a longer period.
Additional services on top of regular bookkeeping
Regular bookkeeping covers the routine cycle, but businesses almost always need one-off work as well. The most common requests are restoring accounting records for past periods and setting up accounting from scratch for a new company.
- designing a system and forms for internal (management) accounting, reporting and control of business transactions, meaning a system for collecting and preparing information for internal users in the course of management;
- putting branches, representative offices, divisions and other separate units on a separate balance sheet and then including their figures in the company's financial statements;
- filing restated financial statements to replace those filed earlier, following an audit, to correct errors found by the company itself or for other reasons;
- stocktaking of assets and liabilities, with the scope and frequency set by the owner (director), except where the law makes it mandatory;
- preparing the liquidation balance sheet: it is drawn up by the liquidation commission and, where the law requires, published within 45 days of approval;
- consolidated financial statements for parent companies: small and medium-sized groups, except groups that include public-interest entities, are exempt from the obligation to prepare and file them.
What accounting services do not cover
Bookkeeping is no substitute for an audit. A statutory audit of financial statements is a separate engagement carried out by an audit firm for entities that the law requires to publish or present their financial statements together with an auditor's report. Diia.City residents also deal with an independent opinion: an assurance report that an audit firm issues after checking the resident's statements in its compliance report. The requirements for the status itself include average monthly pay for engaged employees and gig specialists of at least the equivalent of EUR 1,200 at the official exchange rate, an average headcount of employees and gig specialists of at least nine people, and qualifying income making up at least 90 per cent of total income.
One more point. Accountants and businesses providing accounting services are designated reporting entities for primary financial monitoring (anti-money laundering), alongside audit firms, tax advisers, lawyers and notaries. The exception is people who provide these services as employees.
What is at stake: the risks of poor accounting
Failing to keep accounts, or keeping them improperly, is penalised under both the Tax Code and the Code of Administrative Offences (КУпАП), and sanctions apply both to the company and personally to its officers.
- late payment of an agreed tax liability: 5 per cent of the tax debt paid if the delay is up to 30 calendar days inclusive, and 10 per cent if it is longer (Article 124 of the Tax Code);
- additional tax assessed by the tax authority: 10 per cent of the amount assessed, 25 per cent if the offence was intentional, and 50 per cent for a repeat offence within 1,095 days (Article 123 of the Tax Code);
- late registration of a tax invoice in the Unified Register of Tax Invoices: under the general scale, from 10 to 50 per cent of the VAT amount depending on the length of the delay (Article 120-1 of the Tax Code); while martial law is in force and for six months after the month in which it ends or is lifted, a reduced scale of 2 to 25 per cent applies;
- errors and inaccurate data in reporting on income paid to individuals: UAH 1,020, or UAH 2,040 for a repeat offence within a year (Article 119 of the Tax Code);
- failure to keep source documents and registers: UAH 1,020, or UAH 2,040 for a repeat offence within a year (Article 121 of the Tax Code);
- failure to keep accounts or keeping them in breach of the established procedure, entering false data in financial statements, failure to file financial statements, or late or poor-quality stocktaking: 8 to 15 tax-free minimum incomes (неоподатковуваний мінімум доходів громадян), or 10 to 20 for a repeat offence (Article 164-2 of the Code of Administrative Offences);
- failure to keep tax records or breaching the procedure for keeping them: 5 to 10 tax-free minimum incomes, or 10 to 15 for a repeat offence (Article 163-1 of the Code of Administrative Offences);
- breaching the procedure for calculating the single social contribution and reporting on it: 30 to 40 tax-free minimum incomes, or 40 to 50 for a repeat offence (Article 165-1 of the Code of Administrative Offences).
Document retention periods are set by Article 44 of the Tax Code and vary: 2,555 days for documents needed for transfer pricing control; 1,825 days for source documents, registers and financial statements of corporate income tax payers and of legal entities on the simplified tax system; and 1,095 days for everything else. If documents relate to the subject of a tax inspection, an administrative appeal or court proceedings, they are kept until those procedures end, but no less than the periods above. If documents are lost, damaged or destroyed early, the taxpayer must notify the tax office where it is registered in writing within five days, and this step also falls to the accounting team.
Frequently asked questions
What do accounting services include?
Processing source documents, maintaining accounting registers and tax records, calculating taxes, payroll and the single social contribution, preparing and filing tax returns and financial statements, and dealing with the tax authorities. The exact scope is set in the accounting services agreement, and that agreement also defines the service provider's liability.
What accounting services does an LLC on the general tax system need?
A company on the general tax system needs the full cycle: source documents, accounting registers, tax accounting to calculate the taxable base from accounting data, VAT work including registration of tax invoices in the Unified Register of Tax Invoices, payroll and the annual corporate income tax return. Stocktaking and preparing documents for inspections come on top of that.
What does bookkeeping for an individual entrepreneur (ФОП) include?
For an individual entrepreneur, the service usually covers recording income and expenses, calculating the single tax or personal income tax, the single social contribution and the military levy, and filing returns. Personal income tax payers, including self-employed persons, file the annual return by 1 May of the following year.
Who signs the financial statements when accounting is outsourced?
Under Article 11 of Law No. 996-XIV, the financial statements are signed by the client's director or an authorised person and, at the same time, by the director of the firm that keeps the accounts under contract or a person they authorise. Responsibility for filing and publishing the statements on time remains with the company's director or owner.
How do accounting services differ from an audit?
Accounting services cover keeping financial and tax records and preparing statements. An audit is an independent review of financial statements that have already been prepared, carried out by an audit firm under a separate engagement. A statutory audit applies to entities required to present or publish their financial statements together with an auditor's report. See our audit services section for more.
How long must source documents be kept?
The general period under the Tax Code is 1,095 days; for source documents, registers and financial statements of corporate income tax payers and legal entities on the simplified system it is 1,825 days; and for transfer pricing documents it is 2,555 days. The Accounting Law separately requires processed documents, registers and financial statements to be kept for at least three years.
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