In accounting, a basic distinction is made between single-entry and double-entry accounting. Here listed are the differences and who is obliged to do double-entry accounting.
Simple accounting
Simple accounting is when income and expenditure are listed by date. This means that the payment movement is recorded on the date on which the income or expenditure took place. This means that the movement is only recorded once.
Example:
Double-entry accounting
As the name suggests, in double-entry accounting, unlike in single-entry accounting, each business transaction is recorded twice. In a posting record, the posting is always made from the debit account to the credit account. As a result, the same amount is entered in two accounts at the same time and is thus recorded twice.
As a result, the success of your company can be shown on the one hand in your balance sheet and on the other hand in your income statement.
· Balance sheet: In your balance sheet, the change in equity is shown by comparing the assets and liabilities on the balance sheet date.
· Income statement: In the income statement, income is compared to expenses. Thus, the income statement shows whether a profit or a loss was made.
Recommendation: Double-entry accounting for your business
Double-entry accounting serves as a versatile tool that allows you to create various evaluations of the financial situation of your company. The following specific points become apparent thanks to double-entry accounting:
· You can see exactly how much money is effectively available to the day
· You can see at a glance how many receivables from customers are still open and therefore which revenues you can still expect
· Open invoices, which have not yet been paid, flow into the accounts payable (above mentioned creditors). You always have an overview of which bills you still have to pay.
· Thanks to double-entry accounting, your stock is also precisely documented and you always have an overview of its status.
· The project progress, for example in the construction of a machine or a property, becomes visible.
· Double counting also allows you to see how you are financed. In other words, you can see the composition of your company’s debt and equity capital.
These are just some of the reasons that speak for double-entry accounting. The bottom line is that double-entry accounting gives you more control and visibility of your company’s financial situation.
Who is obliged to do double-entry accounting?
The obligation to keep double-entry accounts is derived from the OR (Code of Obligations). Article 957 of the CO defines that there is a duty for the following companies:
· Sole proprietorships and partnerships that have generated sales of at least CHF 500,000 in the last financial year
· Joint stock companies (AG)
· Limited liability companies (GmbH)
