The basics of accounting in commercial law have a high priority for determining taxes. But also in other contexts, understanding the basics of accounting in commercial law is of enormous importance. For example, this is the case with lending to companies. The basics of accounting in commercial law are also of central importance for the determination of profits for distribution purposes. A distinction can be made between partnerships and corporations, including partnerships with limitations under liability law – in particular, the GmbH & Co. KG is mentioned here. Because from the circumstance of a limitation of liability, the legislator derives special obligations in the preparation of annual accounts. Finally, financial statements should serve the main purpose of commercial law, i.e. primarily the protection of creditors. That is why, above all, larger corporations must include notes in their annual accounts in addition to the balance sheet and the profit and loss account. A management report may also be added, if necessary, even if it is not part of the annual accounts.

A balance sheet in the sense of commercial law is a comparison of assets and liabilities. Certain legal provisions must be observed. This serves to provide information on the assets of a company. In addition, the balance sheet forms the conclusion of an accounting, which in turn also fulfils a documentation function.

With this easy formula you have already gained a good general insight into the basics of accounting in commercial law. However, the balance sheet forms only one part of an equally important instrument for documenting the financial and economic situation of a company, namely the annual accounts. In addition to the balance sheet, the profit and loss account is also part of an annual financial statement. But there are some other aspects that need to be considered. We will now go into more detail.

One of the first questions in connection with the basics of accounting in commercial law is addressed to the group of people who are subject to an accounting obligation. § 242 paragraph 1 HGB answers the question quite clearly. Accordingly, merchants have an accounting obligation. In an extended understanding, however, merchants are also understood to mean partnerships and corporations. However, there may also be exceptions that allow for an exemption from the accounting obligation.

Thus, § 242 paragraph 4 HGB in conjunction with § 241a HGB allows that sole proprietors do not have to draw up balance sheets if they fall below certain values at the end of the reporting period. The prerequisite for this is that for two consecutive reporting dates, the revenues are each below EUR 600,000 and the annual profits are each below EUR 60,000.

For sole proprietors and most partnerships, there is a liability risk with regard to the private assets of the entrepreneurs. In the case of corporations and certain partnerships, however, this risk is excluded. Since commercial law also serves in particular to protect creditors, stricter rules apply to corporations and certain partnerships than to sole proprietors and partnership members who are already liable without restriction.

Therefore § 264 (1) sentence 1 HGB provides for corporations and partnerships within the meaning of § 264a HGB that they have to extend the annual accounts by an annex. It also states that the annual accounts of limited liability companies form a unit of the balance sheet, the profit and loss account and the notes. There is even more stringent regulation for public limited liability companies listed on the capital market, i.e. for public limited liability companies. Here, the annual accounts consist of a unit containing the balance sheet, the profit and loss account, the notes and, in addition, a statement of cash flows and an equity mirror. However, this only applies to public limited liability companies that do not have to prepare consolidated financial statements.

But which partnerships are treated in the same way as corporations in general? Now basically those who are also in principle only subject to limited liability due to their corporate structure. The more precise answer is that this primarily concerns the GmbH & Co. KG. Because here there is also the potential risk of limited liability for creditors. Thus, a GmbH & Co. KG must also meet the requirements for the accounting of a corporation in order to ensure adequate creditor protection.

However, one of the basics of accounting in commercial law is that the preparation of a notes and a management report is only necessary for companies above a certain size. A distinction is made between micro-corporations and small, medium-sized and large corporations and the GmbH & Co. KGs treated equivalent to them.

Micro-enterprises refer to companies that fall below two out of three criteria in two consecutive financial years: