Financial statements must be drawn up for each financial period. As an entrepreneur, you are responsible for the financial statements even if they are prepared by a professional accountant.
The financial statements must comprise the following documents:
a profit and loss account that describes the results formation
a balance sheet that describes the financial status on the balance sheet date
a statement of cash flows (not mandatory for small enterprises and microbusinesses)
the required appended notes
an annual report (not mandatory for small enterprises and microbusinesses)
a list of accounting records and information on their storage methods
a list of voucher types and information on their storage methods
auditor’s note to the financial statements (not mandatory for small-sized companies, cf. electing the auditor).
The format of the profit and loss account and which notes are required to be appended to the financial statements vary according to business type and sector. In addition to the provisions of the Accounting Act, the format of the profit and loss account is regulated by legislation applicable to the business type in question, the tax legislation and the accounting decree, which is determined based on the size of the company. For example, small real estate companies are required to draw up their profit and loss account in accordance with the format laid down in the Decree on the required information of the financial statements of small enterprises and microbusinesses.
A statement of cash flows, as defined in the Accounting Act, i.e. an account of cash inflows (sources of money) and outflows (how the money is spent), is only a mandatory requirement for large corporations or entities of major public interest.
The financial statements, annual report, accounting records and the list of accounting records must be stored for at least ten years from the end date of the financial period. As a rule, vouchers, business-related correspondence and other accounting materials must be stored for at least six years from the end of the year during which the financial period ended.
Self-employed professional individuals and self-employed business entrepreneurs
Self-employed professional individuals and self-employed business entrepreneurs whose business activities are classified in the micro-sized category are not obliged to draw up financial statements. Notwithstanding the above, self-employed professional individuals and self-employed business entrepreneurs are obliged to draw up financial statements if the limits set for defining a small enterprise are exceeded. In such a case, the financial statements shall be drawn up in accordance with the financial statement regulations laid down for microbusinesses.
Entrepreneurs who are not obliged to draw up financial statements must nevertheless draw up a statement on the company’s result and net assets for taxation purposes. In many cases, it may also be wise to draw up financial statements for submission to the financiers and the authorities, where necessary.
Appended notes and the annual report
As with the other documents, the notes required to be appended to the financial statements depend on the business type and the size of the company. In the case of a small-sized business name, such notes may include, for example, pledges or collaterals and contingent liabilities pledged as security for a debt.
The information required to be provided as appended notes by a limited liability company covers, for example, depreciations, changes in equity, personnel and personnel expenses, as well as how much of its assets the company has transferred as security for its debts.
An annual report is a free-form document that supplements and specifies the financial statements. Small enterprises do not need to draw up an annual report, but they are required to provide certain information required of annual reports, as specified, if the information is necessary for forming a correct and adequate picture of the company’s operations. Microbusinesses are not required to draw up an annual report or to provide any specified information required of annual reports.
Micro- and small-sized co-operatives and general partnerships, in which the partners are private individuals, are also required to present in their financial statements the information required by the Co-operatives Act and the Partnerships Act.
General partnerships established in the form of a co-operative, in which all partners are co-operatives, do not need to provide the information required by the Partnerships Act. Small enterprises and microbusinesses may also be required to provide additional information for taxation purposes.