Accounting rules

Gomez · 2022-07-23T13:21:00+00:00

Good afternoon! I heard that in Switzerland there are practically two accounting systems - one for small and medium enterprises, the other - for large corpor...

Accounting rules

Underwood

Hello, Mr Gomez,
Yes, you are right. Small and medium enterprises follow the Swiss Code of Obligations also known as Obligationenrecht in German, while large companies turn to Swiss Generally Accepted Accounting Principles and/or IFRS for accounting standards. The difference between two sets of rules could be formulated in one question: whose interest should be safeguarded? The Code of Obligations prioritizes creditors of the company. Swiss GAAP and IFRS focus on shareholders.

Gomez

Thank you for the clarification, Mr. Underwood. Very interesting!
What about taxation? Are there any differences in how Obligationenrecht and IFRS treated from a tax point of view?

Underwood

Yes, there are. Only OR can serve as a basis for tax reporting. Other accounting standards are not relevant for this purpose.

Gomez

I see. How much detail should a report include if it is elaborated according to OR?

Underwood

Usually financial statements elaborated according to OR are not very detailed. They contain enough information to report a firm's tax liability or apply for a bank loan. But they are not sufficient for public companies traded at the stock market.

Gomez

Hello again!
I have a question about accounting terminology. Could you please explain the difference between accounting and bookkeeping? Thank you.

Underwood

Hi!
Bookkeeping is a record of business transactions during a certain period. Its is based on uniform principles and includes such instruments as ledger and journal.
Accounting is a process of creating main business reports - a balance and an income statement. These are prepared at the end of an accounting period. The aim is to ensure meaningfulness and comparability of the financial statements.

Gomez

Good afternoon, Mr Underwood,
I'm very grateful for your expert answers. These help me understand the industry better.
Could you please comment on the underlying principles of accounting?

Underwood

My pleasure, Mr Gomez.
The underlying principles of accounting do not change much from one country to another. Accounting is built on completeness of information, truth in records, evidence of every transaction. Clarity and expediency are essential because all records must be verifiable.

Gomez

Hello, Mr Underwood
How are accounting entries done in practice?

Underwood

Mr Gomez
The entries are done on the basis of material evidence. This can include receipts, invoices, bills, bank account statements and so forth. The job of an accountant is to correctly identify inflows of revenues and outflows of costs and assign them to respective accounts. The double-entry principle of bookkeeping (each entry is reflected in two corresponding accounts) is a safeguard from mistakes.

Gomez

Which documents are included in a financial statement of a small or medium enterprise?

Underwood

Hi!
Typical financial statements of a medium enterprise would include a balance sheet, profit and loss statement, and notes to the financial statements. The latter is mandatory for sole proprietorship businesses only if they meet the criteria for medium enterprises, for example, turnover figures.

Gomez

Hi, Mr Underwood,
How would you describe the fundamentals of accounting?

Underwood

The fundamentals of accounting include the going concern principle and the need to make time and factual delimitations.

Gomez

What does the going concern principle mean?

Underwood

It means that a company is expected to be in business at least for the next twelve months.

Gomez

And what about time and factual delimitations?

Underwood

Expenses and income must be delimited in terms of time and subject, i.e. those are recorded according to the period and cause.

Lana_S

Hallo

Hier kann man noch weitere Informationen dazu finden:
https://accounting-forum.ch/d/147-einnahmen-ausgabenrechnung-oder-doppelte-buchf-hrung

Gruss
Lana

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