Information on keeping accounting records

Here you will find out information on what regulations in the Czech Republic govern the keeping of accounting records, what form of bookkeeping you can keep and what financial statements you must attach to your tax return.

In the Czech Republic, you must keep accounts as a legal entity if you have your registered office in the Czech Republic or if you are a foreign legal entity that does business or performs other activities in the Czech Republic under special legal regulations.

Accounting regulations for keeping accounting records

The rules for keeping accounting records are governed by accounting regulations. The basic accounting regulation is the Accounting Act, which is supplemented by accounting decrees and accounting standards.

Accounting decrees provide more detailed information on the scope of bookkeeping and the method of preparing financial statements. Most legal entities follow the decree for entrepreneurs when keeping their accounts. Other decrees are intended for example specifically for non-profit organisations, public sector organisations, health insurance companies, banks and other financial institutions, or for insurance companies.

Accounting standards prescribe accounting methods and specific procedures for accounting and preparing financial statements.

Types of bookkeeping

You can keep your bookkeeping as ‘double-entry’ or ‘single-entry’. Most legal entities keep double-entry bookkeeping, where they keep records of the status and movement of property and other assets, obligations including debts and other liabilities, as well as costs and revenues and profit or loss.

Some non-profit organisations may keep single-entry bookkeeping. In single-entry bookkeeping, only income, expenditure and data on assets and liabilities are recorded.

Companies that are issuers of investment securities admitted to trading on a European regulated market keep their bookkeeping and prepare financial statements in accordance with International Financial Reporting Standards (IFRS).

Accounting as a basis for determining the income tax base

Proper bookkeeping is important for you, because when determining the income tax base you will use the accounting profit or loss without the influence of International Accounting Standards, which is the difference between revenue and costs. If you, as a legal entity, use single-entry bookkeeping, your income tax base will be the difference between your income and expenditure. When preparing your tax return, you will then further adjust the profit or loss, or the difference between income and expenditure.

Financial statements as a mandatory annex to the tax return

If you keep double-entry bookkeeping, you must attach financial statements to your tax return, always the Balance Sheet, the Profit and Loss Statement and the Annex. If you keep single-entry bookkeeping, attach a statement of income and expenditure and of assets and liabilities.

If you keep accounts and prepare financial statements according to international accounting standards in accordance with the Accounting Act, you must attach these financial statements to your tax return. In addition, you must include in a separate annex the specification and qualification of the influences from which the difference between the profit or loss determined in accordance with International Accounting Standards and the profit or loss determined in accordance with Czech accounting decrees is apparent. Instead of this special annex, you can submit your Profit and Loss Statement and Balance Sheet prepared in accordance with Czech accounting decrees.

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