Accounting

The accounting for purchasing and selling uses three main accounts: inventory, cost of goods sold, and sales revenue, whereby costs are recorded through purchase prices and selling prices. Inventory captures changes in stock, cost of goods sold captures consumption, and sales revenue captures revenues from sales.

The gross profit, calculated from sales revenue minus cost of goods sold, serves to cover overhead costs and for the calculation of net profit. This is central to assessing a company's cost and pricing strategy.

The general partnership distributes profit shares at the end of the year per capita, provided there is no loss; losses reduce the capital account, and profits can only be distributed after compensation.

A sole proprietorship consists only of the owner, which is why no assets of others need to be considered at the end of the year. Year-end transactions include profit transfers to equity and adjustments of the private account to equity.

In the annual financial statements, all assets and liabilities must be assessed according to the valuation regulations set out in the law of obligations, where the principle of prudence is central. Here, assets may be valued at a maximum and debts at a minimum in order to meet creditor protection and fiscal objectives.

Hidden reserves in business administration: compulsory reserves arise by law, discretionary reserves through conservative estimates, arbitrary reserves serve to influence profits.

Hidden reserves arise when expenses are overestimated and revenues are underestimated, using methods such as undervaluation of assets and overvaluation of liabilities. They affect the external income statement through targeted balance sheet manipulation.

The expenses and revenues listed in the profit and loss statement are corrected through accrual accounting before the annual financial statements are prepared. Accrual entries adjust these items to the correct period.

Final debtor losses are written off directly; anticipated losses are recorded indirectly through bad debt provision. Bad debt provision serves the value adjustment of outstanding receivables.