The sanctions for violating the rules of cash registers use will become tougher from March 1

FROM THE REDACTION

In December 2005 the Georgian Parliament adopted the law in accordance with which the sanctions for violating the rules of cash registers use in cash settlements will become tougher.

The Ministry of Finance points out one of the main factors of working at the aforementioned legislative initiative, along with putting in good order of accounting, was also protection of conscientious payers. The persons that have so far been strictly observing the requirements of the law and carried out cash settlements only by means of cash registers have found themselves in unequal conditions compared to the payers that did not register their incomes and concealed profits and taxes from the budget.
New penalty sanctions for violating the rules of cash registers use will become effective from March 1. Thereupon, we familiarize you with the rules related to using of cash registers and the issue of business accounting of incomes and avail.

In accordance with the decision of the Georgian
Finance Ministry, if an entrepreneur carries out
cash settlements with customers and has not bought a cash register yet, he is obliged to get it for temporal use. Otherwise:
Work without a cash register will entail fining in the amount of 500 GEL. The same repeated for the second time will be liable to fining in the amount of 5000 GEL, and each subsequent instance – in the amount of 10000 GEL.
If the entrepreneur has already bought a cash register, but he still does not use it in cash settlements with customers, this entails the following:
Fining in the amount of 500 GEL. The same repeated for the second time will be liable to fining in the amount of 1500, and each subsequent instance – in the amount of 2500 GEL.
The Tax Code envisages certain privileges in using of cash registers and determines a category of natural persons which are released from the obligation of using cash registers:
– Natural persons that do not use the work of hired persons and sell agricultural production or goods produced (processed) out of it by themselves (irrespective of the fact where they are sold – in the street, at the market, in a stall, booth, etc.);
– Entrepreneurial natural persons that do not use the work of hired persons and independently carry out definite activities on definite space (e.g. production of carpets, servicing and repairs of motor-cars, haircutting, etc.);
– Natural persons that are employed in agricultural production and carry out primary supply of agricultural products, whose annual income does not exceed 100 000 GEL. This privilege concerns small farms established by natural persons;
– Natural persons carrying out economic activities that the obligation of registration with the tax authority as entrepreneurial natural persons;
– Natural persons that rent a dwelling house being in their property;
– Natural persons that hand over tangible asset being in their property (during 2 years after receiving it) and this kind of handing over causes formation of surplus income;
– Natural persons that receive dividends and interests, etc.
– Persons that carry out supply of goods/services and obtain cash on customers’ territory (in houses, organizations, enterprises) – on condition of issuing of a document equal to a cheque;
– Emergency services;
– Acute care;
– Repairs of household appliances with calling in, installation of heating, water pipe, electric wiring in the house, delivery of food products, distribution activities, etc.
– Persons that carry out supply of goods/services and obtain cash by means of automatic and mechanical devices;
– For instance, automatic devices for selling cigarettes and alcoholic drinks;
– Entrepreneurial natural persons that are engaged in street peddling, sell newspapers and magazines by means of a table/stand installed in the street.
As we have already pointed out, inculcation of cash registers should provide for correct registration. It creates equal conditions for recalcitrant payers and conscientious observers of the law.
In accordance with the international accounting standards, income is increasing of economic profit by an enterprise during the accounting period by means of either increasing of assets or reducing of liabilities expressed in increasing of enterprise’s own capital which is not related to additional inpayments of the own capital’s owners.
The notion of incomes includes avails and return (other incomes). Avail is originated in the process of enterprise’s usual activities and is known under different names: avail from selling of goods, avail from rendering of services, interest, dividend, royalty and rent.
Return includes other incomes that can be originated in the process of both usual and extraordinary activities. Like avail, return implies increasing of enterprise’s economic profit. That is why the standards do not consider it separately. For registration and accounting purposes, usual activity’s expenses and incomes can be conditionally separated into operational and non-operational expenses and incomes. International accounting standards does not offer us this kind of classification, but in this case we can make use of the 7th requirement of the international accounting standards that requires grouping of money flows for operational, investment and financial purposes.
Acknowledgement of incomes. Acknowledgement of incomes should take place in case enterprise’s economic profit increases by means of increasing of assets or reducing of liabilities and its effective assessment is possible. That is, acknowledgement of income should take place when increasing of assets or reducing of liabilities is recognized. Limited is acknowledgement of incomes, the effective assessment of which is impossible. Avail represents an important part of incomes. In the given example we shall touch upon the criteria of avail acknowledgement.
Avail is the total sum of economic profit received by the enterprise obtained out of enterprise’s usual economic activities and is expressed in increasing of the own capital without additional investments of owners (International Accounting Standard 18. Paragraph 7)
Avail is obtained out of selling of goods, rendering of services and other usual activities.
Acknowledgement of the avail obtained after receiving of goods takes place if all the conditions mentioned below are satisfied:
– The enterprise will hand over to the buyer all significant risks and profits related to possession of goods;
– The enterprise does not retain permanent managerial participation to the extent which is usually associated with proprietary right or does not carry out actual control over the sold goods;
– If effective determination of the avail sum is possible;
– If it is expected that the enterprise will receive an economic profit out of the operation;
– If it is possible to efficiently determine the expenses related to the operation liable to carrying out during the already opened or future period.
The operation is not considered as selling and acknowledgement of income does not take place if the enterprise retains significant proprietary risks. For instance acknowledgement does not take place when:
– Enterprise retains a liability related to unsatisfactory supply which is not covered by a standard guarantee obligation;
– Obtaining by enterprise of avail out of selling of some goods depends on the buyer’s source of avail, which he should obtain as a result of selling of his goods;
– The contract envisages installation of the sent goods and this condition is an important contract liability that has not been fulfilled by the enterprise yet;
– The buyer has the right, in accordance with some condition envisaged by the contract, to refuse buying of goods, and that is why a possibility of receiving of return by the enterprise is obscure.
This final paragraph points out to sellers (sellers of goods/services) that they should settle the issue of relations with a buyer before selling of goods, and should not carry out trade operations without a necessary information (contract in case of need). The aforementioned insures an entrepreneur against the risk of a possible return of the sold goods, which means a loss to him; it will also form civilized trade relations and contribute to the development of entrepreneurial culture.
If a possibility of receiving of avail is still questionable in spite of the taken measures, the avail is acknowledged only when the charge is paid or questionable conditions related to implementation of the operation are eradicated.
If efficient determination of the results of rendering of services is possible, the acknowledgement of the income related to it is made y the date of striking a balance with indication of the stage of fulfillment of the service agreement. The assessment of the results of rendering of services is carried out efficiently if the following conditions are satisfied:
º% Determination of the avail sum is efficiently possible;
º% Receiving of economic profit by the enterprise out of the operation is expected;
º% Efficient determination of the stage of the service contract’s fulfillment by the date of striking of a balance is possible;
– Efficient assessment of the expenses related to the already rendered services and complete fulfillment of the contract is possible.
Taking into account the stage of rendering of services, acknowledgement of avail is known under the name of “percentage fulfillment method”. According to this method, showing of the avail takes place during the corresponding accounting period of rendering of services.
Efficient assessment of the avail is possible if the following is envisaged by the service contract:
– The terms of provision and satisfaction by each party of the rights related to the services;
– The terms of reimbursement;
– The order of calculation.
When rendering of services takes place in parts during a certain period, acknowledgement of income takes place evenly during the whole period of rendering of services if there is no ground to believe that the stage of rendering of services can be shown more exactly by means of some other method.
If efficient determination of incomes related to rendering of services is impossible, then showing of incomes takes place within the framework of the already acknowledged sum of expenses liable to covering.
Some economic profits may meet the incomes criteria, but, according to requirements of other standards, they may be not acknowledged in profit and loss accounts.
Sometimes acknowledgement of incomes requires studying of the terms of the transaction.
Avail assessment. Assessment of avail should take place in accordance with the real cost of the received or liable to receiving reimbursement (International Accounting Standard, Paragraph 9).
Real cost is the sum by means of which the asset can be substituted or liability be covered by the interested parties being aware of the matter.
Proceeding from economic operations, the avail is determined based on the deal between the enterprise and a buyer of asset or a customer. Its assessment takes place based on the real cost of reimbursement received or liable to receiving by the enterprise taking into account the sum of any trade concession and price concession in it. Besides the fact that the sold goods or services is reimbursed by money or equivalent of funds, goods and services can be exchanged for other goods and services. Avail originating phenomenon may take place during exchange operations. An exchange of goods and services for goods and services of similar nature is not considered as avail originating economic phenomenon. If goods and services is exchanged for different kind of goods and services, this kind of exchange is considered as an avail originating operation. The avail sum is determined taking into account the real cost of the received goods and services which is adjusted by the amount of the received or paid money or its equivalent. If efficient determination of the real cost of the received goods or services is a difficulty, avail assessment takes place based on the real cost of the supplied goods and services which is adjusted by the amount of received or supplied money and funds.
The selling process is often accompanied by receiving of sums belonging to third persons. Since avail includes the assessed in accordance with the real cost and received on enterprise’s account or liable to receiving economic profit, it should be registered separately from the sums liable to handing over to third persons.

Instance I
The enterprise received 2360 GEL, including 360 of VAT, out of selling of goods for cash payment
Debit – 1110 cash in the national currency 2360
Credit – 6111 income out of selling of goods 2000
Credit – 3330 VAT to be paid 360

Instance II
235 GEL worth of goods were returned by the buyer because of bad quality. Money was given out from the cash office. Return of goods will entail VAT tax liability’s adjustment by 36 GEL
Debit – 6120 return of the sold goods and price concession 200
Debit – 3330 VAT to be paid 36
Credit – 1110 cash in the national currency 236

Instance III
The enterprise rendered services related to installation of mountings the cost of which makes up 4 000 GEL. The recipient of services will pay the money within the 10 days’ period
Debit – 1410 requirements related to supply and services 4000
Credit – 6112 income out of selling of services 4000

Instance IV
Based on the contract concluded with the magazine’s publisher, the enterprise distributes the magazine and retains 10% of the annual subscription cost as commission income. 500 GEL were received by the enterprise from the magazine subscribers
Debit – funds account 500
Credit – 6130 commission income 50
Credit – 3190 other current liabilities 450
The returned goods and price concession account is closed
Debit – 6111 income out of selling of goods 2000
Credit – 6120 return of the sold goods and price concession 200
Operational incomes are summed up at the end of the year
Debit – 6111 income out of selling of goods 1800
Debit – 6112 income out of selling of services 4000
Debit – 6130 commission income 50
Debit – 6100 operational incomes 5850
Operational incomes account is closed at the end of the year along with expenses account, with transfer of the total to the income and loss account.