Income Statement in Switzerland: Structure, Steps and Example Explained Simply
An income statement compares all revenues and expenses of a company for a given period and shows whether a profit or loss was incurred. In Switzerland, according to Art. 958 para. 2 CO, it is part of the annual financial statements. It is always mandatory for LLCs (GmbH), corporations (AG), and cooperatives, and for sole proprietorships and partnerships with an annual turnover of CHF 500,000 or more.
What is an income statement, and why do you need it?
The income statement answers exactly one question: Did your company generate more revenue in a period than it incurred in expenses? The formula is very simple: revenue minus expenses equals profit or loss. Everything else builds on this core.
In Switzerland, the term «Erfolgsrechnung» (income statement) is commonly used. In Germany and Austria, the same document is called «Gewinn- und Verlustrechnung (GuV)» (profit and loss account). The principle is the same, but the legal structure regulations differ in detail.
The result is not only read by yourself: banks use the income statement for credit decisions, the tax office for assessment, and management uses it to steer the company. Anyone wishing to know the basics can find further accounting principles for SMEs on nextesy.com.
Who has to prepare an income statement?
Whether you have to prepare an income statement depends on your legal form and your turnover. AG, GmbH, and cooperatives are always obliged. Sole proprietorships and partnerships only from a turnover of CHF 500,000; below this, a simple record of income, expenses, and financial position is sufficient.
Legal form | Obligation to prepare an income statement |
|---|---|
AG, GmbH, cooperative | Yes (regardless of turnover) |
Sole proprietorship, general and limited partnership from CHF 500,000 turnover | Yes |
Sole proprietorship, general and limited partnership under CHF 500,000 turnover | No, recording of income, expenses, and financial position is sufficient |
Exceptions apply to smaller associations and foundations: they also only have to record income, expenses, and financial position.
The legal basis is found in Art. 957 CO for the bookkeeping obligation and in Art. 958 para. 2 CO for the annual financial statements. Even those who are not legally obliged benefit: the income statement makes cost drivers visible and facilitates discussions with trustees and banks.
How is the income statement structured?
The income statement contrasts the revenues of a period with the expenses incurred for them. In practice, it is usually presented in step form: revenue is at the top, and expenses are deducted step by step below until the profit or loss remains at the end. The structure follows the Swiss SME chart of accounts, the de facto standard for small and medium-sized enterprises in Switzerland. Operating revenue is in class 3, operating expenses in classes 4 to 6, non-operating income, as well as extraordinary and non-operating items in classes 7 and 8.
Revenue side (Account class 3):
Production revenue (account 3000), trade revenue (account 3200), and service revenue (account 3400) according to the SME chart of accounts
Expense side (Account classes 4 to 6):
Class 4: Material and goods expenses
Class 5: Personnel expenses
Class 6: Other operating expenses, depreciation, and financial result
Other results (Account classes 7 and 8)
Class 7: Non-operating operating income
Class 8: Non-operating, extraordinary, one-off, or prior-period expenses and income, and direct taxes
The law prescribes what an income statement must contain as a minimum (Art. 959b para. 2 CO): net revenue, changes in inventories of unfinished and finished products and uninvoiced services, material expenses, personnel expenses, other operating expenses, depreciation, financial expenses and financial income, non-operating expenses and income, extraordinary items, direct taxes, and finally the annual profit or annual loss. This structure applies to the production income statement; there is a separate one for the sales income statement.
There are two possibilities for the structure. Most Swiss SMEs use the production income statement, which groups expenses by their nature, for example, material or personnel. The sales income statement is also permitted, which classifies expenses by function, such as production, distribution, or administration.
Important: Revenue and expenses must not be offset against each other. For example, anyone who has rental income and pays rent themselves must report both amounts individually.
Single-step or multi-step: What is the difference?
The single-step income statement shows you whether you made a profit. The multi-step one shows you where it originated.
In the single-step form, all revenues are added together and all expenses are deducted. In the end, there is a single result: profit or loss. This is quickly done and is sufficient for small companies with a simple structure.
Single-step | Multi-step | |
|---|---|---|
What you see | Only the final result (net profit or net loss) | Final result plus intermediate results |
Suitable for | Small, simple companies | SMEs that want to take a closer look |
Workload | Low | Slightly higher |
The multi-step form calculates in stages:
Gross profit: Net revenue minus material and goods expenses
EBITDA: Gross profit minus personnel expenses and other operating expenses
EBIT: EBITDA minus depreciation
Net profit: EBIT plus or minus financial result and other items (non-operating, off-operating, and extraordinary items), less taxes
This allows you to see at each stage where money is being earned and where it is being lost. EBITDA and EBIT are common key figures, but the law does not prescribe them.
What is the difference between an income statement and a balance sheet?
The income statement and the balance sheet both show profit, but from different perspectives: the income statement as a period, the balance sheet as a snapshot on a specific reporting date (such as at the end of the year).
Feature | Income statement | Balance sheet |
|---|---|---|
Time reference | Period (e.g. 01.01. to 31.12.) | Reporting date (e.g. 31.12.) |
What does it show? | Revenue and expenses | Assets and liabilities |
What question does it answer? | Did I make a profit? | What do I own and what do I owe? |
The two are directly related: profit from the income statement increases equity on the balance sheet, a loss decreases it. The amount must be exactly the same in both.
Together with the notes, the income statement and balance sheet form the annual financial statements (Art. 958 CO). Every AG and GmbH must prepare them. Sole proprietorships and partnerships with a turnover of CHF 500,000 or more prepare a balance sheet and income statement; they can usually dispense with the notes.
How do you prepare an income statement? Explained step-by-step
Preparing an income statement always follows the same process, whether you run a sole proprietorship or a GmbH. The five steps below show you how to do it.
Step 1: Collect documents
Gather all receipts and bank statements for the period. Without complete documentation, postings will be missing and the result will not be correct.
Step 2: Assign accounts
Assign each receipt to the correct account of the SME chart of accounts, for example, rent to account 6000 «Rent expense» or wages to account 5000 «Wage expense». Correct account allocation is the foundation of any evaluation, as an incorrectly assigned receipt distorts all intermediate results.
Step 3: Closing entries
At the end of the year, postings are added for which there is no external document: depreciation on equipment or vehicles and amounts that belong to the other year, such as an insurance premium paid in December for the entire next year. For these postings, you create an internal document, such as a depreciation schedule.
Step 4: Calculate the result
Group the accounts according to the SME chart of accounts, i.e. revenue, material expenses, personnel expenses, other operating expenses, and depreciation. Then deduct the expenses step-by-step from the revenue. In this way, you obtain the intermediate results and, finally, the profit or loss. Most accounting software programs perform this step automatically.
Step 5: Reconcile with the balance sheet
Reconcile the net profit of the income statement with the profit in the balance sheet. Both amounts must be identical. If they deviate, there is a posting error somewhere.
Three errors that frequently happen to beginners:
Posting VAT as revenue: Under the effective reporting method, an invoice of CHF 10,810 (incl. 8.1% VAT) contains only CHF 10,000 in revenue. The VAT is paid to the FTA (Federal Tax Administration) and is not revenue of your own. Read more under VAT in Switzerland.
Forgetting depreciation: A computer for CHF 2,400 is normally depreciated over its useful life, for example, at CHF 800 per year over three years. If you record the device as an asset but forget the annual depreciation, you report profits that are too high.
Ignoring deferrals and accruals: January rent paid in December is an expense of the new year. In the old year, it is therefore recorded as an active prepaid expense. If you forget this, you shift expenses into the wrong year and distort the result.
Example: This is what an income statement looks like
In this example, you can see step-by-step how turnover becomes net profit. The figures come from a sample sole proprietorship with one employee for the financial year 01.01. to 31.12.2026.
Area | Position | CHF |
|---|---|---|
Revenue | Service revenue | 95,000 |
Trade revenue | 25,000 | |
Revenue reductions | -2,000 | |
= Net revenue | 118,000 | |
Cost of goods | Purchase of goods | -14,000 |
= Gross profit | 104,000 | |
Personnel expenses | Wages | -42,000 |
Social security contributions | -5,800 | |
Operating expenses | Other operating expenses | -26,000 |
= EBITDA | 30,200 | |
Depreciation | -3,000 | |
= EBIT | 27,200 | |
Financial result | Interest income | 200 |
Interest expense | -1,400 | |
= Net profit | 26,000 |
The gross profit of CHF 104,000 shows what remains after goods expenses. The EBITDA of CHF 30,200 shows what the operating business yields after personnel and operating expenses. After depreciation, an EBIT of CHF 27,200 remains, and after the negative financial result of CHF 1,200, a net profit of CHF 26,000 remains. Taxes do not appear here because a sole proprietorship does not pay its own income taxes. The profit is taxed privately as income for the owner and is also subject to OASI contributions.
Create income statements automatically with accounting software
If you enter receipts and payments on an ongoing basis, you no longer have to compile the income statement yourself. Accounting software like nextesy automatically creates it from your postings, as the SME chart of accounts is already integrated. This way, you can see how your business is doing at any time, and not just at the end of the year. Especially when founding a new company, this saves you from setting up the account structure and allows you to get started directly.
Frequently asked questions about the income statement
What are the stages of the income statement?
The multi-step income statement calculates in stages. First, it deducts goods expenses from net revenue, resulting in gross profit. Personnel and other operating expenses are followed by EBITDA, and depreciation is followed by EBIT. At the end, the financial result and any taxes are offset, leaving the net profit.
What is the difference between a balance sheet and an income statement?
The balance sheet shows assets and liabilities on a specific reporting date. The income statement shows revenue and expenses over an entire period. Net profit from the income statement flows directly into the equity of the balance sheet; both documents are legally inseparably linked under the CO.
What is the profit and loss account in Switzerland?
«Profit and loss account (P&L)» is the term used in Germany and Austria for what is called «Erfolgsrechnung» (income statement) in Switzerland. The principle is the same, but the legal structure regulations differ in detail. The Swiss Code of Obligations (CO) consistently uses the term «Erfolgsrechnung».
Do I have to prepare an income statement as a sole proprietorship?
From CHF 500,000 turnover in the last financial year, yes. Then the full bookkeeping obligation according to Art. 957 CO applies, including balance sheet and income statement. Below this, simple bookkeeping of income, expenses, and financial position is sufficient. However, an income statement is also worthwhile voluntarily: you see where your money goes and have a good basis for discussions with a trustee or bank.
