What is accounting?
Bookkeeping or accounting involves documenting all the financial transactions of firms or individuals. It may be single or double entry. In the former system, only payments are listed. In the latter case, records of sales, purchases, payments, and receipts are maintained by clerks in the daybooks. They are also responsible for entering data in the respective ledgers, i.e., customer, supplier, or general. Bookkeepers use these data to prepare trial balance. This is in turn are used by financial accounts to prepare the balance sheet and the profit and loss statement.
Here are main features of the accounting regulations.
- All accounting records must be in Czech.
- Standard rules and accounting principles must be observed.
- The general structure of the accounts must be in accordance with a standard chart of accounts.
- All businesses registered in the Commercial Register are obliged to use double entry bookkeeping. Single-entry accounting can no longer be used. Accounting units that are not registered in the Commercial Register and whose annual turnover does not exceed CZK 6 million are permitted to keep simplified accounting records.
- A physical count of inventory and fixed assets is required annually.
- There are specific procedural and reporting requirements at the end of the year and a prescribed reporting format.
It is recommended to seek legal advice regarding accounting principles in the Czech Republic as it is very overwhelming and hard process. Under Czech accounting legislation, leased assets are generally treated as fixed assets by the owner, not by the lessee. Deferred income tax should be provided on all timing differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. A deferred tax asset is recognized only to the extent that there are no doubts that there will be future taxable profits available against which it can be utilized.