Basic Knowledge of Bookkeeping and Financial Reporting
Accounting records all of a company’s income and expenses. This helps keep track of cash flow, profits, and taxes.
Accounting is a vital part of every business. It ensures that all income, expenses, and financial transactions are accurately recorded and documented. This includes, for example, the purchase of goods, payroll, invoices, and sales. Through bookkeeping, a company maintains an overview of its finances and can accurately determine its profits and prepare its annual financial statements.
Bookkeeping is subject to legal requirements, including the German Commercial Code (HGB), the Income Tax Act, and the Value-Added Tax Act. Companies are required to maintain their books in a proper, complete, and transparent manner. The goal is to identify financial trends early on and avoid economic risks.
An important component of bookkeeping is the Principles of Proper Bookkeeping (GoB). These stipulate, among other things, that all business transactions must be recorded completely, correctly, and chronologically. Additionally, the document principle applies: no entry without a supporting document. All documents must be securely archived and generally retained for ten years.
Example:
Invoice dated May 1, 2026 (posted and filed)
The retention period begins at the end of 2026
The invoice may not be destroyed until January 1, 2037
Accounting also includes inventory taking, the inventory list, and the balance sheet. Inventory taking involves recording a company’s assets and liabilities. The inventory list serves as a complete record of all stock on hand and forms the basis for the balance sheet. The balance sheet, in turn, shows the company’s financial position and is part of the annual financial statements. It is supplemented by the income statement, which compares revenues and expenses.
To ensure efficient collaboration with the tax advisor, all documents should be carefully prepared. This includes collecting, reviewing, and sorting receipts, as well as maintaining a filing system that is as structured and digital as possible. Well-organized bookkeeping saves time, reduces errors, and ensures greater order within the company.
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As a service and interpreting agency, we help clients better understand documents, prepare paperwork, and facilitate communication with tax advisors, government agencies, and public authorities. We explain important information in a simple and easy-to-understand way.
Our services include assistance with preparing accounting records, sorting and verifying receipts and invoices, and the general organization of important documents. We also help with questions regarding invoices, forms, or official correspondence.
Our goal is to provide our customers with security, clarity, and support in their day-to-day office and financial tasks.
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