Edit Content

We are the Best

Get free Consultant With out Experts.

Get Free Consultant

Other Services

Fundraising
  • Fundraising
  • Pitch Deck
  • Business loan
  • DPR Service
NGO
  • NGO
  • Section 8 Company
  • Trust Registration
  • Society Registration
Property & Personal
  • Property Title Verification
  • Property Registration
  • Rera Complaint
Lawyers & Experts
  • Labour Law Advisor
  • Criminal Lawyer
  • Labour Lawyer
  • Consumer
  • Court Lawyer
  • Divorce Lawyer
  • Banking Lawyer
  • Immigration Lawyer
  • Family Lawyer
  • Litigation Lawyer
  • Intellectual Property Lawyer
  • Trademark Lawyer

Notice: File your Company Audit before the 30th September deadline. Talk to our expert

Accounting for Startups and SMEs

  • Private Limited Company Registration Starting at just ₹999 + Govt Fee
  • Get expert assistance for Indian company registration, including SPICe-INC-32, eMoA-INC-33, and eAOA-INC-34 filings on MCA, along with DSC provisions, all completed in one go for your company.

Guaranteed application submission in 7 days or your money-back T&C

Register Your Company Today

This is the heading

India’s highest-rated
legal tax and compliance platform.

50,000+ businesses incorporated since 2011

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.
John DoeCEO
John Doe
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.
John DoeCEO
John Doe
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.
John DoeCEO
John Doe

Get ₹1000 cashback* upon your incorporation with our banking partners offer. T&C*

Banking partners

Standard

Perfect for initiating company registration
₹1499
₹ 999 + Govt. Fee (to be paid later)
  • Expert assisted process
  • Your company name is reserved in just 2 - 4 days
  • DSC in just 4 - 7 days
  • SPICe+ form filing in 14 days*
  • Incorporation Certificate in 14 - 21 days
  • Company PAN+TAN
  • DIN for directors
Get Started
Unlock partner benefits Post company incorporation worth Rs 4 lakhs

Fastrack

Quick company registration in 7 to 14 days
₹2999
₹ 1,499 + Govt. Fee (to be paid later)
  • Expert assisted process
  • Your company name is reserved in just 2 - 4 days
  • DSC in just 4 - 7 days
  • SPICe+ form filing in 14 days*
  • Incorporation Certificate in 14 - 21 days
  • Company PAN+TAN
  • DIN for directors
Get Started
Get ₹1000 cashback* Unlock cashback benefits upon opening a current account with our partner banks. T&C
Popular

Premium

+ annual compliance to keep your business on track
₹24999
₹ 14,999 + Govt. Fee (to be paid later)
  • Expert assisted process
  • Your company name is reserved in just 2 - 4 days
  • DSC in just 4 - 7 days
  • SPICe+ form filing in 14 days*
  • Incorporation Certificate in 14 - 21 days
  • Company PAN+TAN
  • DIN for directors
Get Started
Get ₹1000 cashback* Unlock cashback benefits upon opening a current account with our partner banks. T&C

Not sure about the packages?

Talk to our experts to kickstart your business registration process.

Talk to registration expert

Companies Act, 2013 (India)

Under the Companies Act, 2013 in India, accounting for Startups and Small and Medium Enterprises (SMEs) follows a set of regulations to ensure transparency, financial discipline, and compliance with tax laws.

Accounting for Startups and SMEs refers to the systematic process of recording, summarizing, and reporting the financial transactions of small and medium enterprises (SMEs) or startups. It involves managing financial statements, tax obligations, and regulatory compliance while ensuring that the company’s financial health is accurately reflected. Proper accounting helps startups and SMEs track their performance, make informed decisions, and comply with legal requirements.

Accounting for Startups and SMEs involves managing financial records, ensuring legal compliance, and providing insights into a company’s financial performance. For small businesses and startups, accounting serves as the backbone of the business, helping track cash flow, prepare tax filings, and manage expenses. It allows businesses to stay organized, make informed decisions, and remain compliant with government regulations.

Financial Clarity

Accurate accounting helps startups and SMEs maintain clear financial records, enabling better decision-making. Understanding cash flow, expenses, and profits helps businesses plan and operate effectively.

Improved Cash Flow Management:

Effective accounting ensures that businesses can monitor their cash inflows and outflows, reducing the risk of liquidity problems. It helps businesses forecast and plan for upcoming expenses, ensuring they have enough funds to cover their costs.

Tax Compliance and Savings

Proper accounting helps startups and SMEs stay compliant with tax regulations and deadlines. It ensures accurate tax filings, helping to avoid penalties or audits, and also provides opportunities for legitimate tax savings and deductions.

Informed Decision Making

With regular financial reports like balance sheets and profit & loss statements, businesses gain insights into their financial health. This helps owners make informed decisions about investments, expansion, cost-cutting, and overall strategy.

Attract Investors and Lenders

Investors and lenders want to see clear financial records before committing to a business. Proper accounting establishes credibility and transparency, increasing the likelihood of securing investment or loans.

Cost Control and Profitability

Accurate tracking of expenses and revenues allows startups and SMEs to identify areas where they can cut costs, optimize spending, and improve profitability. Efficient budgeting also ensures that resources are allocated effectively for growth.

Eligibility Criteria Accounting for Startups and SMEs

 

Checklist Accounting for Startups and SMEs

Business Structure and Registration

  • Ensure proper legal registration (e.g., Pvt Ltd Company, LLP, Partnership, or Sole Proprietorship).
  • Verify GST registration (if applicable, based on turnover threshold).

2. Accounting Software/Manual System

  • Set up an accounting software system (e.g., QuickBooks, Tally, Zoho Books) or a manual system for tracking financial records.
  • Ensure the software/system aligns with GST and tax compliance requirements.

3. Opening and Maintaining Bank Accounts

  • Open a business-specific bank account to separate personal and business finances.
  • Maintain accurate records of all bank transactions.

4. Bookkeeping and Record Maintenance

  • Record all business transactions, including sales, purchases, receipts, and payments.
  • Maintain receipts, invoices, and expense records for all transactions.
  • Record monthly/quarterly expenses such as salaries, office supplies, utilities, and rent.

5. Inventory Management (for Product-Based Businesses)

  • Track inventory of goods, raw materials, and finished products (if applicable).
  • Maintain accurate records of stock movement, including purchases, sales, and returns.

6. Revenue and Expense Tracking

  • Categorize and track all sources of revenue (sales, services, etc.).
  • Keep detailed records of all business expenses, including operational costs and capital expenditures.

7. Payroll Management

  • Set up a system for calculating and disbursing employee salaries.
  • Maintain accurate records of employee wages, deductions, and benefits.
  • Ensure compliance with payroll taxes and statutory deductions (e.g., EPF, ESI).

8. GST Compliance

  • Track and file GST returns (monthly/quarterly as applicable).
  • Keep records of input tax credit (ITC) and output GST.

9. Tax Filing and Payments

  • Ensure timely filing of Income Tax returns for the business.
  • Maintain records of advance tax payments and TDS (Tax Deducted at Source).
  • Keep track of tax deadlines to avoid penalties.

10. Profit and Loss Statement (P&L)

  • Prepare monthly or quarterly profit and loss statements to track business performance.
  • Include revenue, cost of goods sold (COGS), operating expenses, and net profit.

11. Balance Sheet

  • Prepare a balance sheet regularly to track assets, liabilities, and equity.
  • Ensure correct classification of assets (current vs. non-current) and liabilities.

12. Cash Flow Management

  • Track all incoming and outgoing cash flows.
  • Prepare regular cash flow statements to ensure liquidity and smooth operation of the business.

13. Financial Statements for Investors and Stakeholders

  • Prepare financial statements (P&L, Balance Sheet, Cash Flow) for investors, partners, or stakeholders if required.
  • Ensure transparency in financial reporting.

14. Audit (if applicable)

  • Schedule a statutory audit (if required by the business structure or turnover).
  • Ensure all accounting records are in order for audit purposes.

15. Documentation for Tax Deductions

  • Maintain documents supporting tax deductions (expenses, depreciation, etc.).
  • Ensure all relevant documents are ready for tax filing or audits.

16. Compliance with Accounting Standards

  • Ensure financial statements comply with the applicable accounting standards (e.g., IND-AS, GAAP).

17. Record Retention

  • Keep records of all financial transactions for the required duration (usually 7 years under Indian tax laws).
  • Store physical and digital records securely for future reference or audits.
 

Necessary Documents Accounting for Startups and SMEs

 

Business Registration Documents

  • Certificate of Incorporation: Proof of the company’s legal establishment (for Pvt Ltd, LLP, or other business structures).
  • Partnership Deed: If the business is a partnership, the deed outlining the terms and conditions.
  • GST Registration Certificate: If applicable, proof of GST registration for tax purposes.
  • PAN Card: Permanent Account Number of the business.

Banking Documents

  • Business Bank Account Statements: Monthly statements to track business income and expenses.
  • Cheque Books and Payment Receipts: For tracking payments made and received.
  • Bank Account Details: Required for financial reporting.

Invoices and Bills

  • Sales Invoices: Documenting sales transactions, including product/service details, amounts, and GST (if applicable).
  • Purchase Invoices: For recording purchases made, supplier details, and payments.
  • Receipts for Payments: To confirm payments made to vendors, service providers, or other businesses.
  • Credit Memos or Debit Notes: For adjustments or refunds related to sales and purchases.

Payroll Documents

  • Employee Salary Records: Detailed records of employee salaries, wages, bonuses, and deductions.
  • Payroll Register: To track disbursement of wages, statutory deductions (like EPF, ESI), and allowances.
  • Employee Contracts: Agreements outlining terms of employment.
  • Income Tax Returns (TDS): Documents related to tax deductions at source for employees.

Expense Receipts and Records

  • Office Rent/Lease Agreements: For recording office rental costs.
  • Utility Bills: Bills for electricity, water, internet, and other utilities used by the business.
  • Purchase Receipts: For office supplies, raw materials, or inventory used in the business.
  • Travel and Entertainment Receipts: For business-related travel or client entertainment expenses.

Inventory Documents (For Product-Based Businesses)

  • Inventory Purchase Orders: Documents recording orders placed with suppliers.
  • Inventory Stock Records: Tracking of stock levels, stock movements, and valuation.
  • Inventory Invoices: Invoices received for products purchased.

7. Tax Documents

  • GST Returns: Monthly or quarterly returns for GST filing, including input tax credit and output GST.
  • Income Tax Returns (ITR): Annual filings with the Income Tax Department.
  • Advance Tax Receipts: Proof of advance tax payments made, if applicable.
  • TDS Returns: Records of Tax Deducted at Source (TDS) for employees and vendors.

8. Financial Statements

  • Profit & Loss Statement (P&L): For summarizing revenues, costs, and expenses over a specific period.
  • Balance Sheet: To reflect assets, liabilities, and equity.
  • Cash Flow Statement: For tracking the cash position of the business.

9. Depreciation Documents (For Asset Management)

  • Asset Purchase Invoices: To record capital purchases (e.g., machinery, office equipment).
  • Depreciation Schedules: For calculating and tracking depreciation on fixed assets.

10. Loan and Credit Documents

  • Loan Agreements: Details of any loans or financing taken by the business.
  • Repayment Schedules: To track repayments of business loans or credit lines.

11. Audit and Compliance Documents (If Applicable)

  • Audit Reports: If a statutory audit is required, audit reports and supporting documents.
  • Financial Disclosures: Required disclosures for investors, partners, or stakeholders.

12. Miscellaneous Documents

  • Licenses and Permits: Business-related licenses or permits (e.g., Shop and Establishment License, FSSAI License, etc.).
  • Contracts with Vendors/Clients: Agreements detailing the terms of service or sale.
  • Investment Documents: Records of any investments, including shares, bonds, etc.

 

Types of Accounting for Startups and SMEs

Here are the various types of accounting and bookkeeping services commonly offered

Cash Basis Accounting

This method records transactions when cash is exchanged. It is simpler and is often used by small businesses due to its ease of use and clear cash flow tracking.

Accrual Accounting

In accrual accounting, revenues and expenses are recorded when they are earned or incurred, regardless of when cash changes hands. This method provides a more accurate picture of a business's financial health and is required by larger businesses or those with complex operations.

Hybrid Accounting

Hybrid accounting combines aspects of both cash and accrual methods. It is suitable for startups or SMEs that want to track cash flow while also recognizing income and expenses as they occur. This method offers flexibility and can be adapted as the business grows.

Managerial Accounting

This type of accounting focuses on providing internal financial information for business owners, managers, and stakeholders to make informed business decisions. It involves budgeting, forecasting, and performance analysis to guide operations and strategic planning.

Tax Accounting

Tax accounting is focused on ensuring that a business complies with tax laws and regulations. It includes the preparation of tax returns, calculation of taxes owed, and tax planning. This method is essential for businesses to minimize tax liabilities and avoid legal issues.

Forensic Accounting

Forensic accounting involves investigating financial records to detect fraud, embezzlement, or other financial crimes. While more specialized, startups and SMEs may use forensic accounting when there's a suspicion of financial mismanagement or to maintain the integrity of their financial practices.

Characteristics OF Accounting for Startups and SMEs

  1. Cost Efficiency:

    • Startups and SMEs often have limited financial resources, so their accounting systems are designed to be cost-effective. They often use simplified accounting methods (like cash or hybrid accounting) to minimize expenses associated with bookkeeping and reporting.

  2. Scalability:

    • As startups and SMEs grow, their accounting systems need to scale with them. Initial accounting practices may be basic, but as the business expands, accounting systems become more robust to handle increased transactions, more complex reporting, and compliance requirements.

  3. Simplified Financial Reporting:

    • Accounting for startups and SMEs typically focuses on clear and concise financial statements that are easy to understand. This is especially important for business owners who may not have a background in finance, allowing them to make informed decisions without needing complex financial knowledge.

  4. Tax Compliance:

    • Ensuring tax compliance is a key characteristic, as startups and SMEs must adhere to local tax laws. Regular tracking of income and expenses helps maintain compliance, reduce the risk of penalties, and make tax filing easier.

  5. Focus on Cash Flow:

    • Many startups and SMEs prioritize cash flow management. Since these businesses may have limited access to credit or working capital, accounting systems often focus on tracking cash inflows and outflows to ensure liquidity and avoid financial crises.

  6. Real-time Tracking:

    • To make timely decisions, startups and SMEs often use accounting systems that allow for real-time financial tracking. This helps them monitor financial performance, control costs, and address issues as they arise.

  7. Automation and Integration:

    • Many small businesses use automated accounting software to streamline processes, reduce manual errors, and improve efficiency. These systems can integrate with other tools (e.g., invoicing, payroll) to create a comprehensive financial ecosystem.

 

How to register Accounting for Startups and SMEs

step

  1. Select the Type of Accounting Method:

    • Cash Accounting: Record transactions when cash is received or paid.
    • Accrual Accounting: Record transactions when they occur, regardless of cash flow.

  2. Choose Accounting Software or System:

    • For ease and scalability, many startups and SMEs opt for accounting software like QuickBooks, Xero, Tally, or Zoho Books. These platforms simplify financial record-keeping and reporting.

  3. Register with Tax Authorities:

    • Ensure your business is registered for tax purposes with the relevant authorities. In India, this includes registering for Goods and Services Tax (GST) and obtaining a PAN (Permanent Account Number) and TAN (Tax Deduction and Collection Account Number) if required.

  4. Hire an Accountant or Bookkeeper (Optional):

    • While software can automate many accounting tasks, businesses may choose to hire a professional accountant or bookkeeper to ensure compliance with tax laws and to handle more complex financial issues.

  5. Set Up Bank Accounts and Financial Systems:

    • Ensure that your business has a dedicated business bank account to separate personal and business finances. Link this account to your accounting software for streamlined bookkeeping.

  6. Record Financial Transactions Regularly:

    • Start recording all business transactions—income, expenses, payroll, and other financial activities—into your accounting system. This helps keep your books updated and ensures accurate reporting.

  7. Ensure Compliance with Regulations:

    • Understand the accounting standards and tax obligations relevant to your business, including the Companies Act (for registered companies) and the Income Tax Act (for income tax compliance). Ensure your accounting practices meet legal requirements.

  8. Review Financial Statements Periodically:

    • Regularly review your balance sheet, profit and loss statements, and cash flow statements to make informed decisions and ensure financial health.

 

By continuing past this page, you agree to our Terms and conditions , Cookie Policy, Privacy Policy and Refund Policy © – DAV  Business Services Pvt. Ltd. All rights reserved.

Please note that we are a facilitating platform enabling access to reliable professionals. We are not a law firm and do not provide legal services ourselves. The information on this website is for the purpose of knowledge only and should not be relied upon as legal advice or opinion.

Copyright © 2010-2024, All Right Reserved DAV  Business Services Pvt. Ltd.

close menu icon

Get Free Consultancy For All Services.