When conducting business activity in our country, or in the case of associations or foundations – statutory activity, every entity is obligated to maintain settlements and accounting records. Depending on the type of entity or the scale of financial turnover, an entrepreneur or organization may choose simplified accounting or full accounting. What is the difference? As the name suggests, the formula for maintaining simplified accounting is less complicated, while full accounting is more extensive and comprehensive, therefore it often requires entrusting it to specialized entities, such as an accounting office. What exactly are the differences between both methods of maintaining books, when is it advisable, and when is it necessary to implement full accounting in a company?
Simplified accounting or full accounting – what determines the choice?
Under current legal regulations, simplified accounting is intended for, among others, natural persons, general partnerships of natural persons, civil partnerships of natural persons, professional partnerships, certain associations, and social cooperatives whose revenues did not exceed EUR 2 million in the previous financial year.
Full accounting is a mandatory form of recording business operations for, among others, limited partnerships, joint-stock companies, limited liability companies, and other companies whose sales revenues in the previous financial year exceeded EUR 2 million. An entity may also voluntarily choose full accounting – even if it is not legally required to use this form of accounting.
What characterizes simplified accounting?
Full accounting – specifics and benefits of the comprehensive form of accounting
Full accounting involves maintaining accounting books, and thus recording turnovers and balances for the general ledger and auxiliary books (analytical accounts), as well as inventory of assets and liabilities. With this form of settlements/recording of business operations, the culmination of the work of an accounting office or chief accountant in a company is, among other things, a full balance sheet and profit and loss statement. In the meantime, full accounting enables calculation of tax due, as well as precise analysis of the company’s financial situation, and consequently – appropriate control and effective management.
This form of accounting in a company is quite complicated and complex, therefore it requires the involvement of a specialist, most often an accounting office. The advantage of full accounting is the option of ongoing monitoring of the company’s economic situation based on indicators, as well as greater ease in obtaining external sources of financing business operations, through loans, bank credits, or EU grants.
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