Balance sheet and revenue surplus account in German law

German tax law offers entrepreneurs basically two ways of determining taxable profit:

Revenue surplus account (Einnahmen-Überschuss-Rechnung or in short: EÜR)

In the revenue surplus account (EÜR), profit is determined by comparing income and expenses: operating income ./. operating expenses = profit or loss. In principle, the point in time when the operating income or operating expenses are paid out counts for allocation to a certain calendar year. The acquisition costs of fixed assets with a long-term useful life are distributed over the total useful life of the respective asset and can be deducted as operating expenses in annual depreciation amounts. This method of determining profit is relatively easy to handle and recommended for smaller companies.

Balance sheet

Accounting (bookkeeping) is the more complex method of determining operating income. Here, the receivables from buyers and the liabilities to suppliers must be included in the determination of the profit. Furthermore, an inventory must be taken and the stock of goods must be determined exactly on the key date. At the end of each year, a balance sheet (comparison of assets and liabilities) and a profit and loss account must be drawn up.

Who is obliged to draw up the balance sheet?

Those who never get around the obligation to prepare a balance sheet include the legal forms of registered trader ("eingetragener Kaufmann"), general partnership ("offene Handelsgesellschaft" or in short: "oHG"), limited partnership ("Kommanditgesellschaft" or in short: "KG"), limited liability company ("Gesellschaft mit beschränkter Haftung" or in short: "GmbH" and its subform "Unternehmergesellschaft (haftungsbeschränkt)" which is better known as "UG").

Who is not obliged to, but allowed to?

A commercial businessman who is not a merchant basically has the choice between drawing up a revenue surplus account (EÜR) or a balance sheet. However, if he has an annual turnover of more than € 600,000 or an annual profit of more than € 60,000, he is also obliged to prepare a balance sheet.

Members of the so called liberal professions (such as lawyers, tax advisors, physicians et al.) can breathe a sigh of relief. They generally only need to prepare a revenue surplus account (EÜR) at a time - regardless of turnover and profit.

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Martin Kanopka