Einfache Buchführung: Who can use single-entry bookkeeping?
| Type of self-employment | Single-entry bookkeeping allowed |
| Traders
(Gewerbetrieb) |
|
| Farmers and foresters (Land- oder Forstwirt) |
|
| Freelancers (Freiberufler) |
without restriction |
Single-entry bookkeeping for commercial enterprises
Gewerbebetriebe (commercial enterprises) that are not entered into the Handelsregister (commercial register) and have not earned more than €60,000 in profit and/or €600,000 in revenue twice in two consecutive financial years according to Article 141 of the Abgabenordnung (tax code) can take advantage of single-entry bookkeeping. If a trader exceeds one or both of those limits twice, they are then usually obligated to use double-entry bookkeeping. The tax office will officially notify such businesses. Einzelunternehmen (sole proprietorships) and Kleingewerbetreibende (small businesses) are not normally obligated to use double-entry bookkeeping.
Single-entry bookkeeping for farmers and foresters
Farmers and foresters can use single-entry bookkeeping as long as they do not earn more than €60,000 in profit twice in two consecutive financial years and as long as the acreage they cultivate is not worth more than €25,000 in total. If you exceed one or both of these limits two financial years in a row, the tax office considers your business legally obligated to use double-entry bookkeeping and will inform you accordingly by mail. In German, this obligation is known as the Buchführungspflicht.
Freiberufler enjoy a double-entry bookkeeping exemption
The Buchführungspflicht generally doesn’t apply to Freiberufler (liberal professionals) This means that, in most cases, Freiberufler are exempt from the revenue limits that normally mandate a switch to double-entry bookkeeping when exceeded.
How does the single-entry method work?
If you use the single-entry method of bookkeeping, you only have to keep one ledger of all business transactions that influence the business’s assets over one financial year. These transactions are listed in chronological order as individual items in a so-called Kassenbuch (cash book). The most simple and manageable way to do so is to record transactions as individual items in a chart with two columns: one for revenue and one for expenditure.
Example: Single-entry bookkeeping
This is an example of what such records can look like. Here, revenues and expenditures are placed next to each other in two columns that list several typical items.
| Revenues (Einnahmen) |
Expenditures
(Ausgaben) |
| Operating revenues (Betriebseinnahmen) |
Operating expenses (Betriebsausgaben), eg office supplies and equipment, fees. |
| VAT refunded or offset by the tax office | Rent for office space and other business premises |
| Private withdrawals (Privatentnahmen) |
Travel costs for business trips
(Fahrtkosten) |
| … | … |
| Total revenues | Total expenditures |
Accounting items in single-entry bookkeeping
Among other items, a business’s expenditures include usual operating costs such as rent, office supply purchases and fees for internet, telephone, etc.
Acquisition costs for fixed assets that depreciate over several years (such as a company car or production machines) are not taken into account by the single-entry method of bookkeeping. Instead, a separate list must be prepared that properly records assets according to tax law with their respective depreciation values as an operating expense.
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What are the advantages of single-entry bookkeeping?
One of the biggest advantages of single-entry bookkeeping is how relatively simple the method is and how entrepreneurs can use it themselves without a large amount of previous knowledge. To use this method, you can simply take advantage of accounting software. Alternatively, you can also keep a cash book or create an Excel spreadsheet for recording revenue and expenditure.
If I use single-entry bookkeeping, am I obligated to keep running records?
No. Unlike with double-entry bookkeeping, you can theoretically record everything at the end of the year with the help of your receipts and invoices. We strongly discourage you from doing so, however. The potential for error when sorting your collected invoices and receipts by month is too high, and the danger of losing track of your transactions is too great. If you don’t keep running records, you won’t have an overview of your business’s financial situation or a solid basis for making important financial decisions.
If you use the single-entry method, there is also always the possibility that the tax office will audit your tax returns, requiring you to explain and present your revenues and expenditures credibly.
The EÜR: Operating results from single-entry bookkeeping
If you use the single-entry bookkeeping method, you can determine your business’s operating results by preparing an Einnamenüberschussrechnung (or EÜR for short). The EÜR is the single-entry method equivalent to the year-end financial statement prepared by businesses that use double-entry bookkeeping.
All recorded transactions must be able to be verified by their corresponding receipts. This means that you must keep all documents that verify your business transactions for at least ten years. In addition to receipts and invoices, this can also include correspondence with clients as well as documents that confirm the type and scope of a transaction.
Accounting in Germany: The basics
Single-entry vs. double-entry bookkeeping
The single-entry method of bookkeeping is generally ideal for small businesses with simple and straightforward business transactions. If this is the case, it’s enough for sole proprietors, freelancers and small traders to determine their profit at the end of the year by preparing an EÜR. GbRs (short for Gesellschaft des bürgerlichen Rechts) can also take advantage of the single-entry method of bookkeeping. Some separate rules for bookkeeping apply to sole proprietors (Einzelunternehmen).
Corporations, traders that are entered in the commercial registry (Handelsregister) and businesses that have exceeded the €60,000 profit limit or €600,000 revenue limit may no longer use the single-entry method. Instead, they are obligated to use the double-entry method and prepare balance sheets.
The following chart provides an overview of the most significant differences between single-entry and double-entry bookkeeping:
| Single-entry Bookkeeping (Einfache Buchführung) |
Double-entry Bookkeeping (Doppelte Buchführung) |
|
| Conditions (Voraussetzungen) |
Natural persons, traders: (Natürliche Personen, Gewerbebetriebe)
Freelancers |
Traders, sole traders: (Gewerbebetriebe, Einzelkaufleute)
All other merchants: |
| Operating result (Betriebsergebnis) |
EÜR at the end of the financial year | Jahresabschluss: Balance sheet and profit-and-loss statement (Gewinn- und Verlustrechnung, or GuV) at the end of the financial year |
| Bookkeeping scope (Umfang der Buchführung) |
Must not include operational details such as liabilities | Must include all operational details, such as liabilities |
| Inventory (Inventur) |
Not necessary | Mandatory |
| Effort required | Faster and easier to prepare | Difficult to prepare, must fulfil legal requirements for proper accounting |
Changing bookkeeping methods
Keep in mind that your business will have to switch from single-entry to double-entry bookkeeping when you no longer meet the criteria allowing you to use single-entry bookkeeping. Switching from the double-entry method to the single-entry method is also possible. Generally, the tax office determines whether or not a change is possible after reviewing your Jahresabschluss (year-end financial statement) or EÜR. After this decision, a notification from the tax authority will follow. You may only implement the change in the upcoming financial year once you receive this letter. You should therefore never change methods independently!
