Meaning of Accounting
The accounting gives an impression of the economic situation of a company as well as the use of financial resources, for example in the form of profits. In Germany, the Commercial Code, the Publicity Act and the Tax Code result in a so-called accounting obligation. But what about accounting? In this article, we will explain to you what you should pay attention to with regard to accounting in order to avoid any problems.
Accounting regulations & accounting requirements
Accounting regulations cover a wide variety of areas. The following always applies: All companies are obliged to keep accounts. As a rule, this is double-entry bookkeeping. Every now and then, however, simple bookkeeping is sufficient. In addition, companies must prepare a balance sheet and an income statement. Corporations have to comply with significantly more regulations, because they are also obliged to prepare an appendix and a stock report. The duties of a company are specified in detail.
Tip!
If you are obliged to double-entry bookkeeping according to § 242 III HGB , you can read everything on the subject in our lexicon article.
In principle, however, the following applies: Every company must comply with a number of accounting regulations that ensure that both external and internal target groups can gain a realistic picture of the financial situation as well as income and expenditure .
Accounting procedure
Proper accounting forms the basis for optimal accounting. All bookkeeping data are summarized within the framework of the accounting and thus provide information about the financial and economic situation of a company. The use of financial resources can also be shown in the best possible way with this approach. In the following, we would like to show you the most common methods for collecting information on accounting.
These include the following:
- Income surplus account (also called EÜR for short)
- Double-entry bookkeeping
- Cameralistics
Differentiation between internal and external accounting
As already mentioned, the general task of accounting is the complete recording and evaluation of all data generated in the company, which can be divided into two different areas:
Internal accounting
The internal accounting is basically operated in the form of the cost / revenue calculation. With this type, all costs should primarily be determined. Likewise, these are then added to the respective cost factors in connection with the cost bearers or the products according to their cause.
What is special about it is that internal accounting is practically not subject to any statutory regulations. This is a purely imputed invoice that is based exclusively on information from the past and future. The collected data serve as the basis for price determinations and profitability controls in the form of key figures . This allows optimal operational success to be determined.
In internal accounting, a target group is always addressed that is within the company or the group. This includes, for example, control bodies and company management. Every now and then, however, external third parties also come into contact with the information.
Example: A company sends a loan request to a bank. However, this would like to protect itself before lending and therefore requires inspection of the company’s internal documents.
External accounting
In contrast to internal accounting, external accounting is subject to a number of legal requirements. These include, for example, the regulations from the Commercial Code (HGB). Using the numerous instruments of the annual financial statements, such as the profit, loss and balance sheet, the earnings, assets and financial position are presented.
The most important addressees include the tax office, banks, all creditors and possible investors. For these, the comparison with other companies is the most important. Exactly this process is only possible if certain rules are adhered to when creating the external accounting. This begins, for example, with the representations used, the designations and numbers used and their creation through to all other relevant information. In addition, state auditors such as the tax office have it much easier to find their way around company financial statements, because all financial statements are structured according to the same scheme.
Summary overview:
| Internal accounting | External accounting | |
| The goal | Documentation, planning, control and management | Payment measurement and information function |
| The addressees | Internal persons such as the company management | Persons outside the company such as creditors, suppliers or shareholders |
| Applicable legal regulations | As a rule, there are no statutory regulations | Commercial and tax regulations must be observed |
| The base size | Costs and revenues as well as deposits and withdrawals | Expenses and income as well as incoming and outgoing payments |
| The reference object | Either a single area in the company or the entire company or a group | Always the entire company or the entire group |
| The reference period | The reference space depends on the respective purpose of the invoice: during the year in the cost / performance calculation and for several years in the investment calculation | Usually exactly one year |
| Relevant instruments | Investment, finance, cost and performance accounting | Balance sheet, notes, statement of equity, management report, segment reporting, cash flow, income statement |
Accounting according to HGB and IFRS
There is national accounting according to HGB and international accounting according to IFRS. Both differ in fundamental things. We’ll tell you what the differences between the two types of accounting are in the following lines:
National accounting (HGB)
Before we can devote ourselves to national accounting in more detail, we would like to briefly explain the term “HGB” to you. The abbreviation “HGB” stands for the German Commercial Code. This regulates all the important points with regard to the commercial law applicable in Germany. The commercial code is primarily based on the fact that the legal certificate is generally assumed to be given. This makes all legal transactions between merchants much easier.
In addition to these core regulations, the HGB also deals with other legal forms . These include the following: The limited partnership (KG), the open trading company (OHG) and the silent partnership. But regulations for corporations can also be found in the German Commercial Code. This topic mainly deals with financial statements, reports and supplementary regulations for financial service providers such as insurance companies, banks and cooperatives.
Worth knowing: The HGB is strongly influenced by European legislation, so the German Commercial Code is a constantly changing law. Nevertheless, the HGB forms the basis of the accounting rules in Germany.