Preparing annual accounts: step by step

What are annual accounts?

Annual accounts describe the financial position of your business at the end of a financial year, and the result for that year. The core consists of the balance sheet (assets and liabilities at the balance sheet date) and the profit and loss account (income and expenses for the year).

They come with notes: the figures for each item, the rules you followed when valuing assets and liabilities (the accounting policies) and — for a legal entity — a proposed appropriation of the result.

Which parts do annual accounts contain?

• Balance sheet with the assets and liabilities at the balance sheet date.
• Profit and loss account with the income and expenses of the financial year.
• Notes on the balance sheet items: how each item is built up, plus your own explanation.
• Notes on the profit and loss account: turnover, purchases, staff and other expenses.
• Accounting policies for valuation and result determination: the rules you followed.
• Signing: place, date and the name of the director, sole trader or partners.
• For a BV: the proposed appropriation of the result and, often, an abridged management report.

Who must prepare annual accounts?

Whether there is a statutory obligation depends on your legal form. A legal entity (such as a BV) falls under Title 9 of Book 2 of the Dutch Civil Code: it must prepare annual accounts, have them adopted and file them with KVK.

If you are a sole trader or a VOF, your business is not a legal entity. Title 9 does not then apply by force of law and there is no filing obligation. You do need the figures for your tax return and for your own bookkeeping — and the bank or a lender often asks for them.

In what order do you work?

1. Gather your bookkeeping: bank, cash, purchase and sales invoices, payslips and depreciation schedules.
2. Determine the opening balance: equity at the start of the financial year, or your opening balance sheet.
3. Complete the balance sheet: first the assets (activa), then equity and liabilities (passiva).
4. Complete the profit and loss account: turnover, purchases, staff costs, depreciation and other expenses.
5. Check that the balance sheet balances: total assets and total equity and liabilities must be equal.
6. Reconcile equity: opening balance plus result minus drawings must equal the closing balance.
7. Record your accounting policies and write the notes for each item.
8. Have the accounts adopted (for a BV) and file them with KVK if required.

Do it yourself or outsource?

A bookkeeper or accountant usually charges an hourly rate or a fixed amount per year; what that costs depends on the size of your bookkeeping, your legal form and whether a compilation report is needed.

If your bookkeeping is clear and there are no unusual items, you can prepare the annual accounts yourself with a tool. The figures remain your responsibility in any case: even with software you must check for yourself that everything is correct.