This is not the least complicated field for the new organizations as well as for the more experienced ones. Not only the laws have to be followed but the accounting regulations, orders of the Government and of the Minister of Finance, as well. There are a great number of requirements scattered in different legal acts, therefore the organization is advised to hire an accountant or an accounting company with a thorough knowledge in the accounting, from the outset. In order to verify management of the organization's funds an annual audit is recommended; it would show the state of financial and activity-related matters in an organization.

Article 57 of the Law on Corporate Income Tax provides that the taxpayer's accounts shall be kept in a manner that provides sufficient information for the purpose of calculating corporate income tax. Accounting policy shall allow financial accounts to genuinely and correctly reflect the financial state of an organization and results of activity thereof.

Financial accounting is a kind of accounting that includes documenting, analysis of business operations and presenting the information to users. Financial accountability under the laws is not enough it is necessary to conduct the accounting of management in the company; it includes collection of comprehensive information necessary for the internal management, as well as classification, evaluation and presentation thereof (e.g. registration of decisions, regulations, and orders).

Accounts are kept in litas or foreign currency, if needed. Accounting documents shall be in Lithuanian or in a foreign language, if needed. Keeping their accounts business entities shall make a dual record (the same business operation is registered twice: once in the credit accounts and once in debit accounts). All business operations and business events have to be accounted and based on accounting documents. The documents have to be filled in pursuant to the established procedure and signed. There can be no corrections in monetary accounting documents and no fixing of dates. Business operations and events shall be registered no later than until the 30^th of an upcoming month. A statement of business operations and events, based on accounting documents is made which is an accounting register summarizing their data. A business entity shall establish the form, contents and number of them according to its needs. Documents and registers shall be kept for the time period set forth by the Government. A head of the organization (president, director, etc.) shall be responsible for the organization of accounting and safekeeping of accounting documents. Following the expiry of his service term the responsibility shall last for 5 more years therefore the opinion "after me the flood" is not likely to salvage from responsibility for negligence in accounting.

Nongovernmental organizations have to observe the accumulation principle while keeping accounts; it means that the income is registered when they are earned while the expenses are registered when incurred, regardless of receipt or disbursement of money. When this principle is applied for financial accountability all expenses related to the accounting period have to be registered, regardless of their actual payment.

In its Articles of Association an organization has to establish what its financial year would be. It is calendar year in most cases; however, it could be established otherwise considering the particular needs of an organization. It is important to have financial year established as it would govern the accounting. A head has to sign the report of financial year; the annual financial statement has to be approved by the body specified in the Articles (board, revision commission, general meeting of the members, etc.). A head shall be responsible for making and presenting the financial report in time.

Cash operations of an organization (cash flow) shall be documented in the cash orders of income and expenses, as well as advance accounting and VAT invoices (if an organization is a VAT payer). All operations shall be documented in the cash register.

The cash operations are detailed in the Order of the Government:

On the approval of the regulations for work organization and cash operations.

The financial accountability contains the following financial reports:

1. balance-sheet;
2. report of business results;
3. explanatory note.

Their contents and submission are described in the Order of the Minister of Finance "On the approval of regulations for execution and submission of accounting and financial accountability of non-profit making legal persons with limited civil liability" (in Lithuanian).

Public establishments, associations, houses, charity and sponsorship funds, partnerships of multi-apartment house owners, partnerships of gardeners, partnerships of construction and exploitation of garages and other non-profit making organizations, except budgetary establishments and public healthcare establishments are subject to these regulations.

The regulations are recommended to political parties and political organizations, trade unions, religious communities, societies and centres.

Accounting cycle may be summarized as follows:

• Analysis of a business operation or event
• Registration of primary documents in accounting registers
• Accumulation of accounting period data
• Calculation of account balance at the end of the accounting period
• Correction of account data and making a timetable
• Making financial accountability reports.

Accounting includes:

• Making financial reports
• Making specific management and control reports
• Making budged reports
• Making tax declarations and reports (which is described under the heading "Taxation")

The following legal acts must be taken into consideration while keeping accounts and managing financial accountability:

• Law on Accounting (in English)
• Order of the Government "on the approval of inventory regulations" (in Lithuanian)

Please consider! In case of uncertainty of any kind you should consult the State Tax Inspectorate (STI) before taking any action. You may call free advice line 1882. All related information may be accessed at www.vmi.lt.