Bookkeeping is quite a challenge for many entrepreneurs. Sometimes it is easier to create business plans, search for clients or find modern solutions to make our business recognisable. However, we must not forget about one of the most important documents of a company, which is the accounts. What should you know about them? How to properly record income and expenses?
Accounting books - what are they?
Accounting books are nothing more than a compilation of accounting entries. They are a record of turnover and balances and a list of the company's assets and liabilities. Each ledger is made up of several important elements, i.e.: a journal, a general ledger and an auxiliary ledger, a statement of turnover and balances, a list of assets and liabilities. Records should be kept chronologically and meticulously - always in Polish, using Polish currency. Some entrepreneurs decide to create accounting books on their own, while others use reliable outsourcing companies or employ accountants. It is worth knowing that before creating the document, we need to construct an accounting policy in which we include all the rules, e.g. a description of the system used to protect data, methods of valuation of assets and liabilities, or the manner of keeping accounting books.
Elements of the accounts - what information do we include in them?
All the entries we make in the ledger must be correct - in accordance with the actual state of affairs, free from miscalculations and including all the evidence related to economic operations qualified for entry. Each element of the records has a different function. Let us look at them in a little more detail:
- journal - a document for the chronological recording of economic operations. If it is properly maintained, the sum of the entries agrees with the turnover of the general ledger's trial balance. Ensure that the journal entries allow a clear link to the approved accounting records;
- general ledger accounts - In this segment, we note regularly and chronologically the events previously recorded in the logbook - according to the double entry principle;
- subsidiary accounts - are supplementary to the general ledger accounts and are separate systems of ledgers, directories and electronic data sets - they should be consistent with the general ledger accounts;
- statements of movements and balances - should be prepared at the end of the reporting period, preferably at the end of each month, based on the general ledger entries. The document will include the account symbols, balances and totals of the accounts at the date of opening the accounts, as well as the balances at the end of the reporting period;
- list of assets and liabilities (inventory) - must be prepared by taxpayers who have switched from simplified accounting to full accounts in a given year. In other cases, the other elements of the ledger act as an inventory. We will find out more about the list of assets and liabilities in the Accounting Act.
Accounting records - who must keep them?
Are you setting up your own business and wondering if you have to keep accounts? It is an obligation:
- commercial companies;
- partnerships - where sales revenues in the past financial year exceeded €2 million;
- representative offices of foreign companies;
- local authorities, e.g. districts or municipalities;
- banks, as well as other financial institutions operating under banking or securities legislation.
Books of accounts versus income and expenditure accounts
As we can see, bookkeeping mainly concerns large companies. This extremely time-consuming activity is most often entrusted to an experienced accountant. Smaller entrepreneurs are obliged to record profits and costs in a KPiR (revenue and expense ledger). Based on the recorded data, the amount of advance income tax is calculated. The P&L is the so-called simplified accounting, which is most often used by sole traders. However, there is a situation when they must switch to full accounting. This happens when they achieve revenues for the previous year in excess of €1.2 million. Achieving such profits means that they have to switch to full accounting and keep books. Of course, an entrepreneur can voluntarily opt for the aforementioned full accounting, even if he has not made such high profits. However, this will involve higher costs. Recordkeeping with a P&L is much easier and cheaper.
