As the saying goes – double keeps better. This blog explains why double-entry bookkeeping also makes sense for the self-employed.
Self-employed entrepreneurs and owners of sole proprietorships often ask themselves the question: “Do I need double-entry bookkeeping in Switzerland?
Double-entry bookkeeping for self-employed persons is only obligatory when the annual turnover exceeds CHF 500,000. Until then, single-entry bookkeeping is also sufficient.
If it is not compulsory, what are the advantages of double-entry bookkeeping for sole proprietorships?
What is double-entry bookkeeping anyway?
In double-entry bookkeeping, every transaction is recorded twice, in different accounts.
In the balance sheet you can see how the equity capital has changed, while in the profit and loss account you can see whether the sole proprietorship has made a profit or a loss.
A simple example should make this a little clearer:
For an important meeting with a business client you have to travel from Zurich to Geneva. To make some preparations on the way, you decide to take the train.
You pay for the journey with your company credit card. Due to double-entry accounting, the transaction is now recorded on the following 2 accounts:
- Company bank account
- Company expense account
Now you have less money in your bank account but more expenses in your expense account. This gives you the advantage of knowing what the expenditure was for instead of only seeing an account movement.
Uncomplicated thanks to smart accounting software
What sounds complicated in theory, is in practice simple thanks to our Swiss accounting software. Our accountants have only a minimally greater effort than with simple bookkeeping due to the uncomplicated procedure, which brings you cost savings in the long term.
The tax administration says thank you
Additional advantage: In order to give the tax administration a quicker overview, double-entry bookkeeping is recommended in Switzerland anyway. This way you make their work easier and there are fewer questions that waste your time.
Voluntary, but recommended
Although double-entry bookkeeping is voluntary for most sole proprietorships, it offers the advantage for the entrepreneur to see more details about his transactions. With simple bookkeeping, you only see what the profit or loss is.
In the longer term, such additional information gives you more insight into where you should invest more and where you should rather take savings measures.
Seeing at a glance what you are spending your money on – this is enormously helpful for budgeting.