Running a business involves, among other things, accounting for taxes. Owners of small and medium-sized enterprises must decide on the type of accounting in their company. You can choose between full and simplified accounting. Large companies, according to the law, must keep full accounting. Read the article to the end to find out when to keep full or simplified accounting.
Full accounting
This type of accounting is characterized by great detail and precision. The result is the most effective financial management of your business. It’s a good idea to make sure that you’re getting the most out of it. It’s a great way to make sure that you’re getting the most out of your business. In addition, this type of accounting allows for much more. First of all, it allows for a thorough financial analysis of a company by controlling its financial affairs on an ongoing basis. It allows making forecasts for the future on the basis of past events.
In full accounting it is obligatory to keep accounting books. These include, among others:
- journal,
- general ledger with summary of turnover and balances of its accounts,
- inventory of assets and liabilities,
- subsidiary ledgers with the statement of balances of their bank accounts.
The obligation to keep full books of account belongs to:
- civil partnerships,
- Commercial companies (capital companies, partnerships, organisations),
- natural persons, civil law partnerships of natural persons, general partnerships of natural persons and partnerships if their net revenues amounted to at least EUR 2 million in the fiscal year.
When do we keep full vs. simplified accounting? – Simplified accounting
This type of accounting is much simpler, which makes this solution more popular. On the other hand, it does not give a complex picture of the financial activities in the company and it is much more difficult to plan further development of the company. Simplified accounting can be divided into three forms:
- Revenue and Expense Ledger (P&E) – the most common form of recording income and expenses. It is used for current accounting records,
- Tax card – not all types of businesses can run it. The essence of this solution is to pay a fixed amount of tax regardless of income,
- registered lump sum – similar to the tax card, not every entrepreneur can opt for this solution. Unlike other forms of taxation, the registered lump sum is a tax on income, not on revenue.
