To: XYZ From: ABC Date: 30th October 2010 Subject: Accounting Laws in Puerto Rico It is necessary for all persons, who want to establish a business in Puerto Rico that they make a request to the directors. It is important that all relevant certificates are acquired by the business such as, certificate from departments of treasury, labor and human resources, state insurance fund and municipal revenues collection center etc. (Michele’s Legal Resources, 2010).
Some business are exempted from these arrangements that are described in § 6014 (a) of this title, so, it is necessary for these businesses that they also provide certificate on this matter. If XYZ establishes its business as a trust company, then it is necessary for him that he confirms the method of book keeping that is according to the Secretary of the Treasury of Puerto Rico. It is necessary for the trust company to make an exact account or keep appropriate book for any payment to court. It includes all records such as, court name, title case and amount money (Michele’s Legal Resources, 2010).
Without approval, a trust company cannot use its books for another business. Securities that are purchased by trust company must be entered on the basis of actual cost in books (Michele’s Legal Resources, 2010). Puerto Rico law says that if a company develops its branches outside the Puerto Rico, then it is necessary that it keep separate accounts for both main office and branch office. It is necessary the branch office to provide all relevant information timely and accurately to main office (Michele’s Legal Resources, 2010).To compute alternative minimum taxable net income for one financial year, there are some adjustments that are made by companies. These are as follow: First adjustment is related with depreciation.
Depreciation can be calculated by different method such as, straight line method, accelerated depreciation method and combined method. Second adjustment is related with adjustment of long term contracts. Construction business that works more than one year, calculates their taxable income on the basis of percentage of completion method. This method is applicable after August 31, 1987 (Michele’s Legal Resources, 2010).Interest income, dividend income, industrial development income, tourist development income and bona-fide income that are related with agriculture, are exempted from tax. Income statement should include all outcomes from operations.
It also includes general balance sheet and cash flow statement. All these statements should be prepared on the basis of generally accepted accounting principles (GAPP) and also audited by a certified public accountant. These requirements are not for non-profit company and for those companies that have volume of business under one million dollars annually (Michele’s Legal Resources, 2010).If a company receives any fund and guarantee from budget, then it is necessary for it to provide all information related to the consumption of these funds. Company should keep separate account for adjustment of these funds. It is necessary for every organization to evaluate regularly its accounting system and provides an internal control report, which insures that all relevant information is made in the report (Michele’s Legal Resources, 2010). There are some additional laws that are necessary for all financial companies.
These are as below: Provide all relevant information to commission such as, place of business, accounting books, and all documented records that are necessary for these companies. All records that are related with financial statements, statement of income and expenses and reconciliation of capital account should submit to the commission. If a company uses examination for its accounts, then it is necessary that it should pay 300$ for each day and to each examiner (Michele’s Legal Resources, 2010). All are some accounting laws that XYZ should consider before starting his business in Puerto Rico.All these laws are important for the business due to several reasons.
These are as follow: With the help of accounting regulations, interest of different stakeholders can be saved that use this accounting information. Accounting laws are important to make relevant statements, reports and internal control system that are necessary part of the business (Ingram and Albright, 2006). It provides an easy start to any business and also helps in establishing different branches outside the country that are according to the law. It helps to make a business eligible and also get benefits that are appropriate for the eligible business.Proper knowledge of laws insures the success for any business. It also helps in understanding different tax laws that are necessary for any business (Ingram and Albright, 2006).
These are some reasons that explain the importance of laws. If these laws are ignored, then it can also affect any business in several ways. In ignorance of laws, an organization can face both financial and non financial penalties such as, if any wrong information is provided by the business, then it can face a penalty of 10000$ or a imprisonment of 5 years or both and also some legal cost (Michele’s Legal Resources, 2010).If a trust company neglects the rule of book keeping, then it has to pay a penalty of 100$ for each day.
So, these are the affect of ignoring laws on business (Michele’s Legal Resources, 2010). | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | References Ingram, R. W and Albright, T. L. (2006). Financial Accounting: Information for Decisions (6th ed. ).
Canada: Cengage Learning. Michele’s Legal Resources (2010). Retrieved November 1, 2010 from http://www. michie. com/puertorico/lpext. dll? f=templates&fn=main-h. htm&cp=.