What is an Income – Expenditure Account
An income-expenditure account is the simple form of bookkeeping. Here, only the income and expenses of the company for a specific calendar year are listed in a simplified form.
With this invoice, it does not matter whether the income or expenditure was made in cash or via a bank account. The only exceptions are the manufacturing and acquisition costs of objects or items. Property and building expenses, for example, can only be booked as operating expenses after leaving the company. This rule also applies to investments in corporations, but only from an investment value of over 5,000 euros. The same applies to the acquisition of jewelery and precious stones, or antiques where the costs exceed a total value of 5,000 euros.
If sales are achieved in the first two consecutive calendar years that are less than 700,000 euros each, the company or the self-employed can fall back on the simplified income-expenditure calculation. If, on the other hand, sales exceed this limit, double bookkeeping must be kept. The double-entry bookkeeping must therefore be kept from the second financial year. If the turnover is over EUR 1,000,000, the obligation to keep double bookings already occurs in the following year. Only all liberal professions are excluded from this rule.
According to Healthknowing, an income-expenditure account may not be carried out by corporations. In the case of partnerships, too, this may only be used if a natural person is a liable partner and the turnover does not exceed the EUR 700,000 limit. If a company uses the income and expense account, not only the operating expenses and income have to be listed. A goods receipt book, a list of assets and possibly wage accounts for employees must also be kept.
In addition, the company’s sales tax must also be recorded. However, the daily cash balance and every cash movement need not necessarily be recorded. This can be kept separately in an income-expenditure journal. Private deposits or withdrawals do not have to be entered. Cash flows between the company’s coffers and the bank do not appear on it either. In this case, there is also no need to record fixed assets.
Collection of receipts and expenses
All bank income and expenses are documented by a complete collection of account statements. Even if private funds run through the company account, these are included in the documentation of the money movements. By law, only one variant of the documentation has to be used. The company is free to choose the journal or the bank statement collection. Most companies, however, use both variants to provide double protection. This is advantageous for the annual income tax return, since the income and expenses must be broken down into categories in the form provided.
When keeping a journal, there is no extra work on the annual tax return. The journal is kept in chronological order and entries are made on a monthly basis. Cash movements are the exception. These must be recorded daily. Receipts that belong to the inputs and outputs recorded in the journal are also stored chronologically and numbered.
Every cash inflow or advantage that represents a monetary value is defined by law as operating income. This includes all income from services, goods and product sales. Income from commissions and also from interest are also assessed as operating income by the legislator. If private material withdrawals are made, these are also treated as operating income. Daily revenues are determined as a so-called daily solution and only need to be recorded individually if the sales in the corresponding financial year are over 150,000 euros. In order to correctly determine the daily solution, the difference between the end of the till and the beginning of the till is determined. From the result of this calculation, the private deposits and bank movements are deducted, plus cash expenditures.
Labor costs, taxes and other expenses:
Amounts of money that flow out of the company coffers are referred to as operating expenses. Operating expenses include the purchase of goods, personnel costs , local taxes , ancillary wage costs and social security contributions. Expenses such as rent, energy costs, fees and fees paid, advertising and bank interest can also be booked as business expenses.
If the company’s expenses are partially private, the private share must be determined precisely, as this is not recorded in the income-expenditure account. Companies that use this invoice are also obliged to keep a goods receipt book in which all goods purchases are recorded chronologically, regardless of whether the goods are further processed or just sold. The date of purchase, description of the type of goods, as well as the price and the name with the full address of the supplier must be recorded. Cross-references to the documents must also be set or marked in the incoming goods book.
