Accounting basics: single and double entry bookkeeping in Switzerland explained
Accounting in Switzerland is the legally regulated recording of all of a company's financial transactions. The Code of Obligations sets out who has to keep simple income and expenditure accounts and who needs full double entry bookkeeping with a balance sheet and an income statement.
Who is required to keep accounts in Switzerland?
Whether you are required to keep accounts and which system applies depends primarily on your legal form and annual turnover in Switzerland. The Swiss Code of Obligations clearly distinguishes between sole proprietorships and legal entities.
Specifically, the following rules apply:
Sole proprietorships and partnerships with an annual turnover under CHF 500,000: A simplified statement of income and expenditure that records income, expenses, and financial position is sufficient for these businesses.
Sole proprietorships and partnerships with an annual turnover of CHF 500,000 or more: They are required to maintain full double-entry bookkeeping with a balance sheet and income statement. They may dispense with notes to the financial statements as long as they are not required to report under the provisions for larger entities (Art. 959c para. 3 CO).
Legal entities: GmbHs, AGs, cooperatives, associations, and foundations are always subject to the accounting requirement, regardless of turnover.
VAT liability: This begins at an annual turnover of CHF 100,000. The current rates are 8.1% (standard rate), 2.6% (reduced rate), and 3.8% (accommodation). The Federal Tax Administration (FTA) is responsible for billing.
Commercial Register entry: For sole proprietorships, registration is mandatory starting from CHF 100,000 in revenue (Art. 931 CO). The registration does not change the type of bookkeeping required: below CHF 500,000 in turnover, simplified bookkeeping is sufficient even with an entry; double-entry bookkeeping is only mandatory once the CHF 500,000 turnover threshold is reached. You can find the entry in Zefix, Switzerland's central business name index.
Single-entry or double-entry bookkeeping: Which applies to you?
Which accounting system applies to you depends on whether you run a sole proprietorship below or above CHF 500,000 in turnover, or whether you have a GmbH or AG. Because this decision directly determines the requirements for your records, it is worth comparing both systems.
The simplified cash-basis accounting ("Milchbüechli-Rechnung") is the simpler of the two systems. It only records income, expenses, and the financial position without requiring mastery of debit-credit logic. For the vast majority of sole proprietorships in Switzerland, this system is completely adequate.
In the double-entry bookkeeping system, every business transaction is recorded in at least two accounts. The mandatory documents are the balance sheet and the income statement, plus notes to the financial statements for legal entities. The income statement compares an enterprise's expenses and income; the difference yields the profit or loss. The balance sheet shows the financial status regarding assets and liabilities as of a specific reporting date.
Voluntary double-entry bookkeeping can make sense if you need a formal balance sheet for bank financing or for converting into a GmbH. Switching to double-entry bookkeeping early makes changing the legal form considerably easier.
Characteristic | Single-entry bookkeeping | Double-entry bookkeeping |
|---|---|---|
Legal form | Sole proprietorship / partnership under CHF 500,000; associations and foundations not required to register in the Commercial Register | AG, GmbH, cooperative; associations and foundations required to register; sole proprietorship / partnership from CHF 500,000 |
Turnover threshold | under CHF 500,000 (sole proprietorship / partnership) | CHF 500,000 or more (sole proprietorship / partnership) or regardless of turnover (AG, GmbH, cooperative) |
Debit/credit logic | not required | mandatory |
Mandatory documents | Income, expenses, financial position | Balance sheet and income statement; notes for legal entities |
How does double-entry bookkeeping work?
Double-entry bookkeeping is based on a simple principle: every business transaction is recorded simultaneously on a debit account and a credit account. Since double-entry bookkeeping is mandatory for all legal entities and sole proprietorships with a turnover of CHF 500,000 or more, it is worthwhile understanding this principle clearly.
The journal entry always follows the basic formula "Debit to Credit". Every entry affects at least two accounts, and depending on the type of accounts involved, a different effect is produced:
Non-P&L-effective entries: These exclusively affect balance sheet accounts, for example a funds transfer from the bank to petty cash. The annual profit does not change as a result, because balance sheet assets and liabilities merely shift.
P&L-effective entries: These affect balance sheet accounts as well as expense or revenue accounts, for example a purchase of goods. Such entries directly affect the annual profit because they impact the income statement.
The journal entry format looks like this:
Debit account to Credit account
At the end of the year, the running total of all P&L-effective entries results in the profit or loss shown in the income statement. Anyone who understands this principle can categorize any transaction correctly and avoid the most common bookkeeping mistakes right from the start.
What is the SME chart of accounts and how do you use it?
The Swiss SME chart of accounts (Kontenrahmen KMU) is the standard Swiss companies use to organize their bookkeeping entries, and most accounting software comes with it pre-configured. No other Swiss chart of accounts is so widely used: it covers all nine main classes that sole proprietorships, GmbHs, and AGs alike require.
The SME chart of accounts is divided into nine classes:
Class 1, Assets: e.g., Account 1000 Petty Cash, Account 1020 Bank Balances
Class 2, Liabilities & Equity: e.g., Accounts payable, bank loans
Class 3, Operating Revenue: e.g., Revenue from services
Class 4, Expense for Materials / Goods: e.g., Purchase of merchandise, raw materials
Class 5, Personnel Expenses: e.g., Wages, social security contributions
Class 6, Other Operating Expenses: e.g., Rent, insurance
Class 7, Non-operating Results: e.g., Rental income from real estate
Class 8, Extraordinary Results: e.g., Book gains from asset sales
Class 9, Closing: Summary accounts for annual closing entries
Each account carries a unique number; for example, Account 1100 stands for Accounts receivable. Accounting software such as nextesy provides this SME chart of accounts already set up and customizable, so you do not have to start from scratch. If specific accounts for your industry are missing, consulting a fiduciary is recommended. Particularly when setting up the chart of accounts for the first time, a brief discussion with a specialist is worthwhile to ensure the account structure suits your legal form and industry from the outset.
Balance sheet and income statement: What do these documents show?
The balance sheet and the income statement are the two central financial statements that every business required to maintain accounts in Switzerland must prepare annually. Once it is clear which accounts are being posted to, these documents show the financial outcome.
The balance sheet compares assets against liabilities and equity as of a specific reporting date. The income statement compares expenses and revenue; the difference yields the profit or loss. All P&L-effective entries directly influence the equity on the balance sheet. Depreciation and amortization are typical expenses in the income statement: they reflect the reduction in value of fixed assets and thus reduce the reported profit. Legal entities also prepare notes with supplementary explanations, for example on valuation principles (Art. 958 para. 2 CO). Sole proprietorships and partnerships can generally dispense with this (Art. 959c para. 3 CO).
Document | What it shows |
|---|---|
Balance sheet | Asset and liability situation as of the reporting date (Assets vs. Liabilities & Equity) |
Income statement | Expenses and revenue during the financial year; difference = profit or loss |
Notes | Supplementary explanations, e.g. valuation principles, provisions |
Cash flow statement | Inflows and outflows of funds; mandatory for larger enterprises under CO Art. 961 |
Management report | Assessment of the economic situation; mandatory for larger enterprises under CO Art. 961 |
The receipt principle: No entry without a receipt
For every accounting entry, you need supporting documentation, and you must retain this in Switzerland for ten years. A core principle of Swiss bookkeeping is: no entry without a receipt. For the balance sheet and income statement to be correct, every single transaction must be supported by a document.
According to Art. 957a para. 3 CO, accounting records encompass all written records on paper or in electronic form that make the business transaction traceable. Specifically, these include:
Incoming and outgoing invoices
Receipts and cash register slips
Bank vouchers and account statements
Payroll statements
Shipping documents
Accounting-relevant business correspondence
The general obligation to retain business correspondence was abolished in 2013; since then, the retention requirement has applied only to accounting-relevant documents. The retention period is 10 years starting from the end of the financial year in which the last entry was made (Art. 958f para. 1 CO, as of 2026). Electronic storage is permitted provided the data can be read at any time and reproduced without alteration, as explicitly governed by the Ordinance on the Maintenance and Retention of Accounts (GeBüV). Anyone archiving receipts digitally should look into the topic of data protection in accounting before choosing a system.
Common mistakes when getting started with bookkeeping
Beginners make three bookkeeping mistakes particularly often, and all three can be avoided right from the start with clear processes. Those who know the statutory requirements but make typical mistakes during setup still risk tax problems.
Mixing personal and business finances
Mistake: Paying expenses from private accounts or using the business account for personal purchases.
Consequence: Disorganized books, problems during tax audits, and incorrect reporting of business expenses. For a sole proprietorship, private withdrawals are also not considered business expenses, but rather drawings of profit.
Immediate action: Strictly separate the business account from the private account right from the start and record all private withdrawals separately.
Missing or delayed document recording
Mistake: Not filing receipts and invoices immediately, or entering them into the accounting system only weeks later.
Consequence: Forfeiture of input tax deduction in the VAT statement submitted to the Federal Tax Administration (FTA), as well as gaps that are difficult to explain during audits.
Immediate action: Digitize every receipt right after the transaction and assign it to the corresponding journal entry.
Failing to budget for OASI contributions on profits
Mistake: Forgetting the OASI/DI/IC (AHV/IV/EO) contribution during liquidity planning.
Consequence: Unexpected back payments when the compensation fund settles accounts following the definitive tax assessment. Self-employed individuals pay up to 10% of their profit; the minimum contribution is CHF 530 per year (as of 2026).
Immediate action: Set aside a provision for OASI contributions during the current financial year to safeguard your liquidity.
How software simplifies getting started with bookkeeping
For beginners without prior bookkeeping knowledge, AI-powered software handles the steps most prone to error, allowing you to focus on your core business. Because these mistakes arise primarily when entries are recorded manually and with a delay, a well-designed cloud solution noticeably reduces this risk.
nextesy is an AI-native Swiss accounting software specifically designed for founders and SME owners without an accounting background:
Pre-configured SME chart of accounts: You open the software and find all nine classes already set up, without needing to configure them manually.
Automated document capture and account assignment: Receipts are uploaded, recognized, and assigned to the appropriate accounts, structurally preventing the most common beginner mistake (delayed recording).
VAT administration: Current rates are preloaded; reporting to the FTA is supported directly from the system.
Fiduciary module: If you consult a fiduciary from time to time, you work together on the same data set in real time.
The starting price is CHF 29 per month for SMEs and CHF 19 per month for fiduciaries; a 14-day trial period is free of charge. Compare accounting software or test nextesy now for free.
