bexio supports and simplifies your double-entry accounting by simplifying it. Do not worry if you are currently unsure what double-entry accounting is. In this report, we aim to clarify these topics.
Content
A glossary of the most important terms is available at the end of this report. This aims to assist you if a term is unclear and serves as a basis for your understanding.
Why keep accounts?
Every company has stakeholders with whom it interacts. You might send an invoice to your customers or need to complete a tax declaration for the government. Other stakeholders include suppliers, employees, and investors. You must record all these interactions with your stakeholders. Bookkeeping assists you with this process. With bookkeeping, you maintain an overview of your finances. Continuously recording your financial movements is one of the main tasks of bookkeeping.
Properly and timely maintained bookkeeping provides insight into your financial position. This means you can always see how much money is in your accounts (liquid assets) and how much debt you have (liabilities). An important point is also that your profit/loss is visible, allowing you to consistently monitor your business performance and determine if your activities are profitable. Bookkeeping is also the foundation for your tax declaration and VAT statement.
Who is required to keep accounts?
According to the new accounting law (as of 2015), the following companies are obliged to keep double-entry bookkeeping records.
- Public limited companies (AG)
- Limited liability companies (GmbH)
- General and limited partnerships
- Sole proprietorships with a turnover exceeding CHF 500,000.
Principles of proper accounting?
The principles of proper bookkeeping, according to OR 957a Para. 2, are:
- Complete, truthful, and systematic recording of business transactions and events
- Documentary evidence for individual bookkeeping entries (no booking without a voucher)
- Clarity, comprehensibility
- Appropriateness (adaptation to the type and size of the company)
- Verifiability
Areas of accounting
Accounting can be divided into two main areas: financial accounting and operating accounting. bexio can help you maintain your financial accounts. In addition to the main areas, there are also corresponding sub-ledgers; for example, bexio offers debtor and creditor accounting.
| Main Area | Auxiliary statement |
|
Financial Accounting
- Recording of ongoing business transactions
- Income Statement
- Balance Sheet
|
- Accounts Receivable
- Accounts Payable
- Cash Accounting
- Stock/Material Accounting
- Inventories
|
Glossary
Here you will find an overview of the most important bookkeeping terms, in alphabetical order, and their explanations.
Assets
Assets are on the left (debit) side of the balance sheet. They show where your money is invested, for example, in your bank account (bank) or as inventory in your warehouse (inventory), or as office furniture (movable assets) and buildings (real estate). More detailed information can be found here.
Opening Balance
All balance sheet accounts have an opening balance. This is taken from the opening balance sheet and is the amount with which the account begins.
Fixed Assets (AV)
Fixed assets are primarily items you intend to keep for a long time. For example, office furniture (movable assets), houses and land (real estate), or cars (vehicles).
Expense
Expenses are costs incurred due to business activity. Examples include advertising costs (advertising expense), personnel costs (wage expense), or depreciation of assets (depreciation).
Balance Sheet
The balance sheet is a comparison of assets and liabilities, meaning it shows where your money is invested and where it comes from. The balance sheet must always be balanced (assets must equal liabilities).
Debtors
Debtors or accounts receivable are, so to speak, all invoices you have issued that have not yet been paid by the customer. Debtors therefore show you how much money your customers still owe you.
Double-entry bookkeeping
Your bookkeeping is considered double-entry when two accounts are affected by every entry. This means that every transaction involves a debit and a credit. Consequently, you will have a balance sheet and an income statement, both of which show your profit. An example can be found in this article.
Equity (EK)
Equity represents assets you have personally invested in the company or, in the case of a public limited company, the share capital. Typical assets include cash, vehicles, and real estate.
Opening Balance Sheet
The opening balance sheet is prepared at the very beginning of the year. The opening balances for the accounts are taken from it. It must match the closing balance sheet of the previous year.
Income Statement (ER)
In the income statement, you compare your expenses with your revenues to determine whether you have made a profit or a loss.
Financial Key Figures
Financial key figures are important guiding metrics for you and your company. They enable you to measure your business success, monitor processes (controlling), prepare your company for the future, and compare your company with others.
Liquid Assets
Liquid assets include all accounts that effectively contain money, such as cash, postal accounts, and bank accounts.
Liabilities (FK)
Liabilities are essentially debts. For example, outstanding supplier invoices (creditors), your bank account being overdrawn (bank debt), or a loan you have received (passive loan).
Credit
The credit side is the right side of an accounting account, meaning the right side of the T-account.
Creditors
Creditors are debts you owe, resulting from unpaid invoices.
Value Added Tax (VAT)
VAT is essentially a consumption tax levied indirectly. This means it is paid by the consumers of a product or service.
VAT by agreed consideration
If you account for VAT using the agreed consideration method, you record your VAT at the time you issue the invoice.
VAT by received consideration
If you account for VAT using the received consideration method, you only record your VAT once you have received the payment.
Liabilities
Liabilities are on the right (credit) side of the balance sheet. They indicate the source of your money, whether it is debt you have incurred (liabilities) or assets you have invested in the company (equity). More information can be found here.
Balance
All income statement accounts, which are the accounts within the income statement, have a balance. This is the amount present in the account at the end of the accounting period. This amount is then transferred to the income statement.
Closing Balance
All asset and liability accounts have a closing balance. This is the amount in the account at the end of the accounting period, similar to the balance for income statement accounts. The closing balance of the accounts is transferred to the balance sheet.
Closing Balance Sheet
The closing balance sheet is the balance sheet prepared at the end of a year.
Debit
The debit side is the left side of an accounting account, meaning the left side of the T-account.
Current Assets (UV)
Current assets are assets that are available in the short term. For example, the money in your bank account or your goods in stock.