Income statements in Switzerland: structure, steps and an example, explained simply

What is an income statement, and why do you need it?

The income statement answers exactly one question: Did your business generate more income than it incurred expenses during a given period? The formula is remarkably simple: revenue minus expenses equals profit or loss. Everything else builds on this core principle.

In Switzerland, the term «Erfolgsrechnung» (income statement) is standard. In Germany and Austria, the same document is known as the «Gewinn- und Verlustrechnung (GuV)» (profit and loss statement). The principle is identical, though the statutory presentation requirements differ in the details.

The result is not only read by you: banks use the income statement for lending decisions, the tax authority uses it for assessments, and management relies on it to steer the business. Anyone wishing to learn the essentials will find further information on nextesy.com under accounting fundamentals for SMEs.

Who is required to prepare an income statement?

Whether you must prepare an income statement depends on your legal form and your revenue. Corporations (AG), limited liability companies (GmbH), and cooperatives are always required to do so. Sole proprietorships and partnerships are only obliged to prepare one from an annual revenue of CHF 500,000; below that threshold, a simplified record of income, expenses, and financial position is sufficient.

Exceptions apply to smaller associations and foundations: they are also only required to record income, expenses, and their financial position.

The legal basis is set out in Art. 957 CO for the duty to keep accounts and in Art. 958 para. 2 CO for the financial statements. Even those not legally required to prepare one will benefit: the income statement makes cost drivers visible and facilitates discussions with fiduciaries and banks.

How is the income statement structured?

The income statement matches the revenues of a period against the expenses incurred to generate them. In practice, it is usually presented in multi-step form: revenue appears at the top, expenses are deducted step by step below, until the final profit or loss remains. The structure follows the Swiss SME chart of accounts, the de facto standard for small and medium-sized enterprises in Switzerland. Operating revenue is recorded in class 3, operating expenses in classes 4 to 6, non-core operating results as well as extraordinary and non-operating items in classes 7 and 8.

Revenue side (account class 3):

• Production revenue (account 3000), trading revenue (account 3200), and service revenue (account 3400) according to the Swiss SME chart of accounts

Expense side (account classes 4 to 6):

• Class 4: Material and merchandise expenses

• Class 5: Personnel expenses

• Class 6: Other operating expenses, depreciation and amortisation, and financial result

Further results (account classes 7 and 8)

• Class 7: Non-core operating result

• Class 8: Non-operating, extraordinary, one-off or prior-period expenses and income, as well as direct taxes

The minimum contents of an income statement are prescribed by law (Art. 959b para. 2 CO): net sales revenues, changes in inventories of finished and unfinished goods and unbilled services, material expenses, personnel expenses, other operating expenses, depreciation and valuation adjustments, financial expenses and financial income, non-operating expenses and income, extraordinary items, direct taxes, and finally the annual profit or annual loss. This breakdown applies to the nature of expense method; an alternative structure exists for the function of expense method.

There are two presentation formats. Most Swiss SMEs use the nature of expense method (Produktionserfolgsrechnung), which categorises expenses by their type, such as materials or personnel. The function of expense method (Absatzerfolgsrechnung) is also permitted, which groups expenses according to their function, such as production, sales, or administration.

Important: Revenues and expenses must not be offset against each other. Anyone who receives rental income and also pays rent, for example, must disclose both amounts separately.

Single-step or multi-step: What is the difference?

The single-step income statement tells you whether you made a profit. The multi-step format shows you where it came from.

In the single-step format, all revenues are added together and all expenses are deducted. The result is a single bottom line: profit or loss. This is quick to prepare and sufficient for small businesses with straightforward structures.

The multi-step format calculates figures in stages:

1. Gross profit: Net sales minus material and merchandise expenses

2. EBITDA: Gross profit minus personnel expenses and other operating expenses

3. EBIT: EBITDA minus depreciation and amortisation

4. Net profit: EBIT plus or minus financial result and other items (non-core operating result, non-operating and extraordinary items), minus taxes

This lets you see at each stage where money is being made and where it is being spent. EBITDA and EBIT are common key figures, though they are not mandated by law.

What is the difference between an income statement and a balance sheet?

The income statement and balance sheet both show profit, but from different perspectives: the income statement over a period of time, the balance sheet as a snapshot on a specific reporting date (such as year-end).

The two are directly linked: the profit from the income statement increases equity on the balance sheet, while a loss decreases it. The amount must match exactly in both.

Together with the notes, the income statement and balance sheet constitute the annual financial statements (Art. 958 CO). Every AG and GmbH must prepare them. Sole proprietorships and partnerships with revenue of CHF 500,000 or more prepare a balance sheet and income statement; they can generally dispense with the notes.

How do you prepare an income statement? Step-by-step guide

Preparing an income statement always follows the same process, whether you run a sole proprietorship or a GmbH. The five steps below walk you through how it works.

Step 1: Collect supporting documents

Gather all receipts, invoices, and bank statements for the period. Without complete documentation, entries will be missing and the result will be inaccurate.

Step 2: Assign accounts

Allocate every document to the correct account under the Swiss SME chart of accounts—for instance, rent to account 6000 «Rent expense» or salaries to account 5000 «Wage expense». Proper account allocation is the foundation of any reporting, as an incorrectly assigned receipt distorts all intermediate results.

Step 3: Year-end closing entries

At year-end, entries are required for which no external voucher exists: depreciation on equipment or vehicles, and accruals or deferrals for items belonging to another accounting period—such as an insurance premium paid in December covering the entire following year. For these entries, you create an internal voucher, such as a depreciation schedule.

Step 4: Calculate the result

Group the accounts according to the Swiss SME chart of accounts into categories: revenue, material expenses, personnel expenses, other operating expenses, and depreciation. Then deduct the expenses step by step from revenue. This gives you the sub-totals and ultimately the net profit or loss. Most accounting software handles this step automatically.

Step 5: Reconcile with the balance sheet

Reconcile the net profit on the income statement with the profit on the balance sheet. Both figures must be identical. If they differ, there is an accounting error somewhere.

Three common mistakes beginners make:

• Booking VAT as revenue: Under the effective reporting method, an invoice of CHF 10,810 (incl. 8.1% VAT) represents only CHF 10,000 in revenue. The VAT is remitted to the FTA (Federal Tax Administration) and is not revenue for your business. Learn more under VAT in Switzerland.

• Forgetting depreciation: A computer costing CHF 2,400 is typically depreciated over its useful life, for instance at CHF 800 per year over three years. Recording the device as a fixed asset but failing to book annual depreciation results in overstated profits.

• Ignoring accruals and deferrals: January rent paid in December is an expense of the new year. In the closing year, it is therefore recorded as an accrued asset (prepaid expense). Forgetting this shifts expenses into the wrong year and distorts the result.

Example: What an income statement looks like

This example shows step by step how revenue turns into net profit. The figures are based on a model sole proprietorship with one employee for the financial year 01/01 to 31/12/2026.

The gross profit of CHF 104,000 shows what remains after cost of goods sold. The EBITDA of CHF 30,200 illustrates the operating return generated after personnel and operating expenses. Following depreciation, EBIT stands at CHF 27,200, and after the negative financial result of CHF 1,200, the net profit is CHF 26,000. Taxes do not appear here because a sole proprietorship does not pay corporate income taxes. Instead, the profit is taxed privately as income of the business owner and is subject to AHV/OASI contributions.

Create an income statement automatically with accounting software

If you record receipts and payments continuously, you no longer need to assemble your income statement manually. Accounting software such as nextesy generates it automatically from your postings, as the Swiss SME chart of accounts is already built in. This way, you can see how your business is performing at any time, not just at year-end. Especially when founding a new company, this eliminates the need to configure an account structure from scratch and allows you to get started immediately.

Frequently asked questions about the income statement

What are the stages of an income statement?

The multi-step income statement calculates figures in stages. First, cost of goods sold is deducted from net revenue to determine gross profit. After personnel and other operating expenses, you arrive at EBITDA, and after depreciation at EBIT. Finally, the financial result and any taxes are factored in to yield the net profit.

What is the difference between a balance sheet and an income statement?

The balance sheet displays assets and liabilities on a specific reporting date. The income statement shows income and expenses over an entire accounting period. The net profit from the income statement flows directly into equity on the balance sheet; under the Swiss Code of Obligations, both documents are intrinsically linked.

What is the profit and loss statement called in Switzerland?

«Gewinn- und Verlustrechnung (GuV)» is the term customary in Germany and Austria for what is called an «Erfolgsrechnung» (income statement) in Switzerland. The underlying accounting principle is the same, though statutory layout rules differ in the details. The Swiss Code of Obligations (CO) consistently uses the term «Erfolgsrechnung».

Do I need to prepare an income statement as a sole proprietorship?

From CHF 500,000 in revenue in the previous financial year, yes. At that level, full statutory accounting duties apply pursuant to Art. 957 CO, including a balance sheet and an income statement. Below this threshold, simplified bookkeeping covering income, expenses, and financial position suffices. However, preparing an income statement voluntarily is also worthwhile: you see where your money goes and gain a sound basis for discussions with fiduciaries or banks.