External Accounting
- Balance Sheet
- Profit and Loss Statement
- Cash Flow Statement
- Commercial Code
- Commercial Code
- Accounting according to the legal form of the company
- Accounting in Studies
Introduction
External accounting, also known as financial reporting, is a branch of business administration and serves to present a company's financial statements to the outside world. It is presented using:
- Profitability : means the ability to generate long-term and sustainable profits.
- Financial situation : the aim is to achieve future goals, with monetary income for consumption purposes being sought.
- Financial position : refers to the company's liquidity, i.e., its ability to meet future payment obligations. This is documented by a financial plan or cash flow statement.
The external accounting is based on the following calculation methods:
Balance Sheet
The balance sheet is prepared in accordance with Section 266 of the German Commercial Code (HGB), a distinction is made between:
- Asset side
It is divided into fixed assets, i.e., assets intended to serve the company over the long term, such as machinery or buildings, and current assets, i.e., all assets that remain with the company only for a short time. These include cash on hand, goods in stock intended for sale, and receivables from customers.
- Liabilities side
The liabilities side of the balance sheet shows where the company's available funds come from. This is divided into equity, i.e., the financial resources used by the company itself, and debt, i.e., funds granted to the company externally. These can be, for example, loans or credits from banks and suppliers, as well as provisions.
Profit and Loss Statement
The P&L structure is defined in Section 275 of the German Commercial Code (HGB) and is designed to compare the income generated during the fiscal year with the expenses incurred and, based on this, determine the company's success. The profit and loss statement, together with the balance sheet, forms the annual financial statements.
Cash Flow Statement
Also known as a cash flow statement, it is used to depict the cash flows within a company. Cash flow is the difference between the balance of cash inflows and outflows of funds or financial resources within the company. Because the cash flow statement is cash flow-oriented, it is a useful complement to the balance sheet and income statement in the annual financial statements.
Tasks
Documentation
All business transactions that occur within a fiscal year must be fully documented. This includes, among other things, all bank accounts, cash books, incoming and outgoing invoices, and purchase contracts. The recording of business transactions is also referred to as financial accounting or bookkeeping. These records serve to determine assets and liabilities, calculate operational success, and facilitate internal control.
Information
The annual financial statements serve an informational function. On the one hand, recipients, such as lenders or suppliers, are interested in the company's profitability. However, the annual financial statements also serve as a basis for determining taxes. Accordingly, the tax authorities also have a legitimate interest in providing complete and relevant information.
Control
Both the profitability and efficiency of the company, or individual divisions, are of great importance to the company. Based on these figures and appropriate actions, the company's liquidity can be ensured in the long term.
Disposition
The figures determined on the basis of expenses and income must be prepared for management; they serve as the basis for business decisions, e.g. regarding future investments.
Commercial Code
The German Commercial Code (HGB) is the most important instrument for accurate financial reporting. It sets out all the essential framework conditions, i.e., all the rights and obligations to which a merchant is subject and which he or she must comply with when preparing his or her annual financial statements.
The HGB is divided into five books:
- Book 1: Commercial Status - This regulates who is a merchant within the meaning of the German Commercial Code (HGB) and what obligations are associated with this.
- Book 2: Commercial companies and silent partnerships - The second part of the German Commercial Code defines the legal forms of “general partnership” and “limited partnership”.
- Book 3: Commercial Books - Book 3 contains the most important part of the Commercial Code for merchants. It contains all relevant regulations that must be observed when preparing their annual financial statements. Book 3 is divided into two main sections:
First section : contains regulations for all merchants, such as the rules according to which accounting and inventory must be drawn up.
Second section : this section contains additional provisions for corporations, e.g. how the appendix and the management report should be structured.
- Book 4: Commercial Transactions - Here you will find more detailed regulations, particularly for commission transactions and commercial purchases.
- Book 5: Maritime Trade - Maritime trade has a special role in the German Commercial Code (HGB) because it is influenced by international law and other international regulations.
Note : Depending on the legal form of the company in question, the Stock Corporation Act (AktG), the Limited Liability Company Act (GmbHG) and the Publicity Act (PublG) are also relevant.