Corporate Financial Accounting in Germany | Tax Law Firm

Corporate Financial Accounting in Germany

What is financial accounting?

Financial accounting is the backbone of business management, providing a clear and accurate representation of a company's financial activities. It involves the systematic collection, recording and analysis of all business transactions and financial events within a company. Financial accounting not only documents financial performance and assets, but it also establishes the foundation for preparing annual financial statements and tax returns.

Financial accounting is essential for submitting advance VAT tax returns, preparing annual financial statements and determining profits.

Corporate Financial Accounting Germany

Accounting obligation: Financial statements and income statements

Merchants and trading companies, such as limited liability companies (LLCs) and stock corporations, are required by the German Commercial Code to maintain (double-entry) accounts. However, under certain conditions, small businesses or freelancers may be exempt from the obligation to carry out double-entry bookkeeping. Instead, they may prepare a purely tax-based net income statement (Einnahmen-Überschuss-Rechnung, EÜR).

What is double-entry bookkeeping?

Double-entry bookkeeping, also known as double-entry accounting, is a method that records every business transaction in two accounts: a debit account and a credit account. This system provides a double record for each transaction, ensuring an accurate and traceable record of all financial movements. Double-entry bookkeeping offers a comprehensive view of a company's financial situation. It is particularly crucial for capital market-oriented companies and companies with substantial financial volumes.

Differences between double-entry bookkeeping and EÜR

Companies obligated to keep accounts, such as LLCs or stock corporations, use double-entry bookkeeping to determine profits by creating a balance sheet and a profit and loss statement (P&L) – essentially, a two-part annual financial statement. This method includes allocation of all business transactions at regular intervals throughout the year.

Conversely, the net income statement (EÜR) is a simplified method for determining the profit within a company. In this, all income and expenses are offset against each other, resulting in the year's profit or loss. The EÜR is prepared according to the inflow-outflow principle.

Principles of proper accounting

The principles of proper accounting (Grundsätze ordnungsmäßiger Buchführung, GoB) outline the rules and standards for carrying out accounting, or bookkeeping, to ensure accurate and reliable documentation.

These principles include:

  • Completeness
  • Correctness
  • Clarity
  • Traceability
  • Orderliness of the accounts

Adherence to proper accounting principles is critical for tax authority recognition and fostering trust among business partners, investors and authorities.

In a constantly evolving business world, precise and correct accounting is essential for informed decision-making, financial transparency and legal compliance. A solid understanding of accounting principles and the proper method can significantly contribute to the financial success of a business.

Steps for proper accounting

1. Document collection

Gather all documents related to the financial transactions of your business, such as invoices, receipts, bank statements and cash receipts.

2. Document sorting

Categorize receipts by transaction type, date or accounts to ensure organized recording.

3. Document entry

Enter the data from the receipts in the accounting software or records. Note the date, amount and accounts affected by the transaction.

4. Account assignment

Assign the appropriate accounts to each transaction. Follow the company's chart of accounts, which lists the individual accounts and their functions.

5. Entry in the general ledger

Transfer the assigned data to the general ledger, which contains all accounts and their balances. The debit and credit entries are recorded here.

6. Account closure

At the end of the accounting period, typically at the end of the month or year, accounts are closed. This process involves calculating balances and assigning them to their respective accounts.

7. Preparation of interim financial statements

Throughout the business year, interim financial statements can be prepared to provide a snapshot of the company's financial status.

8. Annual financial statements

At the close of the financial year, annual financial statements are prepared. These include a balance sheet, profit and loss statement (P&L) and notes. The annual financial statement offers a comprehensive view of the company's financial performance.

9. Review and analysis

Regular account reviews are essential for ensuring accuracy and completeness. Financial data analysis can help identify trends, opportunities and risks.

10. Tax returns

Tax returns, such as advance VAT returns, income tax returns and trade tax returns, are prepared based on the data from accounting.

11. Archiving

All receipts and accounting documents should be kept in accordance with statutory retention periods to ensure traceability and audit security.

Your financial accounting tax advisor

From the submission of receipts to the preparation of insightful financial statements, we will guide you through every step of the accounting process. We ensure your bookkeeping adheres to the principles of proper accounting and accurately reflects your financial situation.

With cutting-edge accounting software and a customized approach, we not only ensure tax obligation compliance but also help you gain valuable insights into your business development. Trust our expertise to make your accounting efficient and target-oriented, allowing you to concentrate on your core business.

Your accounting firm in Germany

Our team is always available to answer questions about accounting, annual financial statements and corporate bookkeeping. If you're interested in working with us, don't hesitate to contact us. You will have the opportunity to choose from our attractive offers.

The best way to reach us is via e-mail ( or phone (+49 69 76 75 77 85 21).

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