This article explains the basics of accounting and is aimed at readers who want to familiarize themselves with the principles and obligations of this field. Accounting, often referred to as the "memory of a company," is a systematic process for recording, documenting, and analyzing all of a company's financial transactions. It serves not only to fulfill legal requirements but also as an essential tool for internal management and decision-making.
Financial accounting forms the backbone of every economically active company. Its tasks range from pure documentation to providing crucial information for external parties such as tax authorities and investors.
1.1 Legal Foundations and Principles
Accounting in Germany is subject to a number of legal provisions that govern its structure and implementation.
1.1.1 GoB and Others
The principles of proper bookkeeping (GoB) are unwritten rules that have evolved from commercial law (HGB), tax law (AO), and generally accepted business practice. They are the foundation of all proper accounting and ensure that a company's financial situation is presented objectively and comprehensibly. No fundamental changes to the GoB are expected for 2026, but their application remains constantly relevant. The central GoB include:
- Completeness: All business transactions must be recorded without gaps. No transaction may be omitted. This is comparable to building a house, where every wall and every beam must be noted to ensure the stability of the overall structure.
- Accuracy: Every booking entry must be factually correct, both in terms of amount and account. Errors must be corrected and not concealed.
- Factual accuracy: Only actual business transactions may be booked. Fictitious or planned transactions do not belong in accounting.
- Clarity and orderliness: Bookkeeping must be understandable and traceable for third parties. Disorganized or chaotic accounting does not fulfill its purpose. This also means adhering to a uniform chart of accounts.
- Individual recording obligation: Every single business transaction must be recorded in detail. Group bookings are only permitted in exceptional cases.
1.1.2 HGB, AO, and Other Obligations
The German Commercial Code (HGB) sets the commercial legal framework, particularly for merchants. It regulates the obligation to keep books, the preparation of balance sheets and profit and loss statements (GuV), valuation principles, and retention obligations.
The German Fiscal Code (AO) regulates the tax law requirements for bookkeeping and is relevant for all taxpayers. It contains detailed provisions on the requirement for supporting documents, the timeliness of bookkeeping, and the duty to cooperate in tax audits. For 2026, it is expected that individual detailed regulations may be adjusted within the scope of possible legislative procedures such as the Annual Tax Act or through changes in the coalition agreement. It is therefore advisable to attend relevant seminars and updates to stay up-to-date.
1.1.3 Obligation to Provide Receipts
Every booking requires a supporting document. This principle is fundamental. A supporting document is written or electronic proof of a business transaction. No booking without a supporting document. This serves the purpose of auditability and the prevention of manipulation. Electronic invoices (e-invoices) are gaining increasing importance and will prospectively replace paper documents in many areas. The necessary infrastructure and correct archiving of these digital documents are central topics for 2026.
1.2 Double-Entry Bookkeeping
Double-entry bookkeeping is the predominant system of commercial accounting. Its name derives from the fact that every business transaction is recorded in at least two accounts: once in debit and once in credit.
1.2.1 The Principle of Debit and Credit
Debit and credit are not synonyms for 'plus' and 'minus,' but placeholders on T-accounts. The equation 'Assets = Liabilities' as well as 'Expenses = Revenues' must always be maintained. This is comparable to a scale that must always remain balanced to ensure accurate measurement. A business transaction is booked on the left side (debit) of one account and on the right side (credit) of another account, so that the sum of debit postings always equals the sum of credit postings.
1.2.2 Asset Accounts and Income Statement Accounts
- Balance sheet accounts: You record the assets (assets) and liabilities (liabilities) of a company at a specific point in time. This includes, for example, cash, bank, receivables, payables, fixed assets, and equity. At the beginning of an accounting period, the opening balances from the balance sheet are transferred to the balance sheet accounts.
- Profit and loss accounts: You record expenses and revenues of a company during an accounting period. Examples include sales revenue, rental costs, personnel costs, and depreciation. The balances of the profit and loss accounts flow into the profit and loss statement (P&L) and determine the company's result.
1.3 Key Tasks of Accounting
Accounting fulfills several core tasks that go beyond the mere recording of numbers.
1.3.1 Documentation and Accountability
Accounting documents all financial transactions without gaps. This serves accountability to owners, creditors, employees, and the state. It is proof of proper business management.
1.3.2 Information and Control
The processed accounting data provide important information for company management. They enable the analysis of profitability, liquidity, and asset situation. Based on this data, sound decisions can be made, for example, regarding investments, pricing, or personnel matters.
1.3.3 Taxation and Profit Determination
Accounting is the basis for determining taxable profit and thus for calculating taxes (income tax, corporate tax, trade tax, value-added tax). The tax authorities rely on the correct information from bookkeeping.
2. Accounting Obligation 2026
Not every company is obliged to keep double-entry books. The obligation to keep books is tied to specific criteria.
2.1 Thresholds and Exceptions
According to § 141 AO, there is an obligation to keep books for tradespeople whose turnover exceeds certain thresholds. For 2026, the following thresholds are relevant: an annual turnover of more than 600,000 euros or an annual profit of more than 60,000 euros in the calendar year. Sole proprietorships and freelancers below these limits can determine their profit using the income-and-expenditure calculation (EÜR). Separate thresholds apply to farmers and foresters.
2.2 Inventory, Balance Sheet, and P&L
Anyone required to keep books must prepare an inventory at the end of each fiscal year. The inventory is a detailed list of all assets and liabilities.
2.2.1 The Balance Sheet
The balance sheet is a snapshot of a company's assets (assets) and liabilities (liabilities) on a specific date. It provides information about the financial and asset situation. It is like a snapshot of financial health at a particular moment.
2.2.2 The Profit and Loss Statement (P&L)
The P&L statement compares revenues and expenses for an accounting period and determines the company's profit or loss. It is comparable to a movie showing the development over a period. Seminars and updates will address current changes, for example, in the handling of advance payments or the accounting of provisions.
2.3 Other Mandatory Documents: Cash Book and Receipts
The cash book is a separate, continuous record of all income and expenses made in cash. It must be maintained daily. The documentation requirement, as already mentioned, extends to all business transactions. Every cash inflow and outflow must be evidenced by a document.
3. Accounting Throughout the Year
Accounting follows a fixed cycle. A "year-end update" for 2026 will highlight important steps and possible changes.
3.1 Ongoing Bookings
During the fiscal year, all business transactions are recorded chronologically and systematically. This includes, among other things:
- Incoming and outgoing invoices: Recording of supplier invoices and invoices to customers.
- Bank transactions: Booking of incoming and outgoing payments via the bank account.
- Cash transactions: Recording of cash transactions in the cash book.
- Payroll accounting: Booking of personnel costs.
- Depreciation: Recording the depreciation of fixed assets.
3.2 Monthly and Quarterly Closings
Regular closing entries serve for control and preparation of VAT returns. Checking bank and cash balances is part of clean bookkeeping.
3.3 Annual Closing Activities
At the end of the fiscal year, comprehensive closing activities take place:
- Inventory: Physical inventory of stocks and fixed assets.
- Valuation: Valuation of assets and liabilities according to commercial and tax law regulations.
- Accruals and deferrals: Temporal allocation of expenses and revenues (e.g., deferred charges, provisions). For 2026, it should be noted that potential legal changes (e.g., coalition agreement 2025, annual tax law) could lead to updates in the calculation or treatment of provisions.
- Determining the balance: The correct transfer of figures from the previous year is essential.
- Preparation of balance sheet and P&L: The formal preparation of the annual financial statements.
- Review of invoice numbers: The seamless sequence of invoice numbers is an indicator of orderliness.
4. Digitalization and Future Developments
Accounting is subject to continuous change, especially due to advancing digitalization.
4.1 Digital Processes and Document Management
Modern accounting systems enable largely paperless processing. Digital documents, automatic imports of bank transactions, and audit-proof archiving are common practice. E-invoicing, which will become mandatory from 2025, represents a significant change that will be fully established by 2026.
4.2 Cloud Solutions and Automation
Cloud-based accounting software offers flexibility and allows access from anywhere. Automation functions, such as automatic recognition of document data or the booking of recurring business transactions, relieve accountants.
4.3 Impact on Professional Practice
Increasing digitalization requires accountants to adapt their knowledge and skills. Further training in digital processes, data analysis, and the use of new software solutions is essential for 2026 and beyond.
5. Useful Information and Updates for 2026
| Category | Description | Example values | Unit |
|---|---|---|---|
| Revenue | Total revenue from sales | 150,000 | Euro |
| Expenses | Total expenses for operating costs | 90,000 | Euro |
| Profit | Revenue minus expenses | 60,000 | Euro |
| Debtor days | Average time until payment received | 30 | Days |
| Creditor days | Average time until payment made | 45 | Days |
| Liquidity Ratio 1 | Liquid assets in relation to short-term liabilities | 120 | Percent |
| Equity ratio | Equity in relation to total assets | 40 | Percent |
To meet the demands of the times, regular updates and attention to new regulations are indispensable.
5.1 Tax Changes and Relevant Information
The 2025 coalition agreement and the annual tax law may bring relevant changes for accounting practices in 2026. These could include adjustments to depreciation rules, tax thresholds, or the handling of special business transactions.
5.1.1 E-Invoicing
E-invoicing will be mandatory for B2B transactions from 2025 and therefore firmly anchored in accounting from 2026. Companies must adapt their processes accordingly to ensure electronic invoicing and processing.
5.1.2 Relevant Thresholds
The minimum wage is expected to rise to €13.90 per hour on January 1, 2026. This must be taken into account in personnel planning and payroll. The thresholds for small-amount invoices may also be adjusted, which will affect the design of invoices and the obligation to provide receipts. Information on this will be discussed in current seminars.
5.2 Further Training and Information Sources
Regular participation in further training is important for accountants and entrepreneurs to stay up-to-date. This includes seminars on the basics of accounting, as well as special updates dealing with the changes of the respective year.
5.2.1 Courses and Training for 2026
Offered, for example, by the Chamber of Industry and Commerce (or ask your tax office about recommended seminars. Private providers are also available….) courses include, among others:
- Accounting
- Journal Entries
- Depreciation
- Inventory changes
- Chart of Accounts
- Document organization
- Digital tools in accounting
5.2.2 Shortened Retention Periods
There may be changes in the retention obligations for documents, for example, through simplifications for certain digital documents. It is advisable to keep an eye on the current legal regulations at the turn of the year. A "guided tour" through the innovations in the seminars offers orientation here.
This article provides an overview of the essential aspects of accounting. It is recommended to seek the help of a qualified tax advisor for complex issues and to continuously inform yourself about current developments. Accounting is a field that requires precision and up-to-dateness.
