Accounting in Germany (Buchhaltung) [2026 Guide]

Key Takeaway:

• Bookkeeping (Buchführung) focuses on recording financial transactions. Accounting (Buchhaltung), on the other hand, focuses on interpreting, analyzing, and summarizing the bookkeeping data.
• There are two types of bookkeeping methods: single-entry bookkeeping and double-entry bookkeeping.
• If you have the option to choose, always pick single-entry bookkeeping to keep your life simple.
• Your accounting must follow the principles outlined in GoBD. If you don’t, the tax office may reject your accounting.

This is how you do it

• Understand the basics of accounting in Germany.
• Keep all your invoices in one place.
• Open a business bank account and use a GoBD-compliant accounting software to keep your accounting in order.
• Get support from a tax advisor for maintaining books, especially double-entry bookkeeping.
• Starting a business may feel overwhelming. This is why we have written a book to explain each step you have to take from setting up to running a successful business in Germany.

Table of Contents

Accounting is a topic that every business owner must know. You don’t have to be an expert, but knowing the basics is a must.

In this guide, you’ll learn everything about accounting in Germany, types of accounting, the GoBD standard, etc.

What is Bookkeeping (Buchführung)?

Bookkeeping (Buchführung) focuses on recording financial transactions, such as:

• Income
• Expenses
• Invoices
• Reciepts

A bookkeeper’s primary task is to maintain accurate and up-to-date financial records.

What is Accounting (Buchhaltung)?

Accounting (Buchhaltung) involves interpreting, analyzing, and summarizing the financial data that the bookkeeper maintains. In other words, accountants use bookkeeping data to provide financial insights and support in decision-making and tax filing.

Accounting involves creating financial statements, such as balance sheets and profit and loss statements.

NOTE: Accounting and bookkeeping are two distinct terms with different meanings. However, these terms are often used interchangeably. 

Types of bookkeeping methods in Germany

The German tax office accepts two ways of maintaining your books.

• Single-entry bookkeeping (einfache Buchführung): In this, the “cashflow principle” applies. As per this principle, you record a transaction when it enters or leaves your bank account. In other words, you record a transaction only once you receive or pay the money. You don’t record a transaction if you create an invoice, but the customer hasn’t paid yet.
• Double-entry bookkeeping (doppelte Buchführung): As the name suggests, you enter every transaction at least twice. It’s more complex than single-entry bookkeeping. However, it offers more information about your business’s financial health.  

Before we dive into each type of bookkeeping method, let’s understand which bookkeeping method you must use.

Which bookkeeping method should you choose in Germany?

Usually, you don’t have a choice in selecting a bookkeeping method. Your company’s legal form and revenue determine the bookkeeping method.

The following businesses are required to use the double-entry bookkeeping method. 

• Corporations (like GmbH, UG, AG),
• Registered merchants (e.K.),
• Commercial partnerships (OHG, KG, GmbH & Co. KG), 
• Businesses registered in the commercial register (Handelsregister),
• Small business owners (Gewerbetreibende) or partnerships that exceed the following thresholds for two years in a row: 800,000€ annual revenue or 80,000€ annual profit (as of 2026)

The following businesses can choose between single-entry and double-entry bookkeeping.

• Freelancers (Freiberufler)
• Small business owners (Gewerbetreibende), if they don’t exceed the following thresholds for two years in a row: 800,000€ annual revenue or 80,000€ annual profit (as of 2026)

Example: Suppose you are a small business owner (Gewerbetreibende). You made a profit of €90,000 in 2024. In 2025, you generated a profit of € 100,000. In this case, you exceeded the profit threshold of 80,000€ (as of 2025) for two consecutive years. Therefore, you must begin using the double-entry bookkeeping method from 1. Jan 2026. 

NOTE: The tax office will inform you if you have to start using the double bookkeeping method from a particular year. Suppose they don’t. In this case, you are not required to start using double bookkeeping method. Of course, you can voluntarily use double bookeeping method anytime.

What is Single-Entry bookkeeping in Germany?

Single-entry bookkeeping is the simplest bookkeeping method for profit determination. It is called einfache Buchführung in German. The result of the single-entry bookkeeping is your “profit and loss statement” (Einnahmenüberschussrechnung in German). 

In the single-entry bookkeeping method, you sum all your income in a particular year and subtract all your expenses incurred to earn that income. The result is the profit or loss made in that year.

Profit/Loss = Income in the year – Expenses in the year

Example: Sarah made an income of 80,000€ in 2025. She incurred costs of 30,000€ in 2025. Thus, her profit in 2025 is 80,000 – 30,000 = 50,000€.

Single-entry bookkeeping follows the cash flow principle.

As per this principle, you record a transaction when it enters or leaves your bank account. In other words, an invoice is taxed only when you get paid. Similarly, you can deduct an expense only when you have paid it. There is one exception to this rule. 

Exception to the cash flow principle

The cash flow principle doesn’t apply to regularly recurring income and expenses that arise 10 days before the beginning or after the end of the calendar year. This is from 22 December to 10 January.

The following rule applies to the regularly recurring income and expenses during this period. The transaction will be taken into account for tax purposes in the year to which it economically belongs.

Example:

Suppose you paid the January 2026 rent on 30 December 2025. Usually, as per the cash flow principle, you must add it as an expense for the tax year 2025. 

However, as per the exception explained above, you must add the January 2026 rent as an expense for the tax year 2026. The reason is that the January rent economically belongs to the tax year 2026.

Similarly, if you paid the December 2025 rent on January 2, 2026, you must consider it as a 2025 expense.

What are the advantages of Single-Entry bookkeeping?

• Single-entry bookkeeping is simple and hence requires less effort.
• The profit and loss statement (Einnahmenüberschussrechnung) you create as part of single-entry bookkeeping is the same as Annexure EÜR. You fill out Annexure EÜR when filing your income tax return. Thus, having EÜR part of bookkeeping saves you time when filing taxes.

How do you handle private transactions under the single-entry bookkeeping method?

You don’t consider private transactions in profit/loss determination. Private transactions include withdrawing money for your personal use, buying products or services for personal use, etc.

What is considered an income in single-bookkeeping? ->

What is double-entry bookkeeping in Germany?

In double-entry bookkeeping, you record your transactions TWICE. Once in the pure provision of service and once in the payment. 

In double-entry bookkeeping, you create two financial statements.

• Balance Sheet (Bilanz)
• Profit and loss statement (Gewinn- und Verlustrechnung)

In double-entry bookkeeping, an invoice is taxable when issued. This means you may have to pay tax on an issued invoice, even if you haven’t received the money yet. This is also known as “receivables”. 

The same applies to expenses. You may have received the services invoice; however, you haven’t paid yet. You can deduct this cost from your taxes. This is also known as “liabilities”.

We won’t go into the details of how to do double-entry bookkeeping. It’s complex and requires professional knowledge. Moreover, as a founder, you should focus on your product and not on accounting.

We recommend working with a tax advisor and using accounting software when using double-bookkeeping.

Best accounting software in Germany ->

What is considered revenue in single-entry bookkeeping? 

Before we dive into what is considered revenue in single-entry bookkeeping, you must first understand the difference between revenue and income/profit.

• Revenue is the money that flows into your account due to a business activity (as per the cashflow principle).
• Income or profit is the amount left after deducting all the business-related expenses from your revenue. 

As per the cashflow principle, there are three types of revenues.

1. Revenue generated when your customer pays you for your service or product.
2. Revenue generated by collecting VAT.
3. Transfer of business assets for private use.

Let’s understand each in detail.

Revenue generated when your customer pays you for your service or product

When you sell a service or product, you issue an invoice to your customer. Depending on your business and product, the customer may have to pay before or after getting the service.

As soon as a customer pays you, you record it as revenue in your EÜR. 

Suppose you issued an invoice. However, the customer hasn’t paid yet. In this case, you won’t consider it revenue.

Only once the money goes into your account can you consider a transaction as revenue. This is the first type of revenue you add to your EÜR.

Revenue generated by collecting VAT

VAT is a type of tax that business owners collect from their customers and pay to the tax office. 

VAT is also considered a revenue in your EÜR per the cashflow principle. The reason is that the VAT you collect lands in your bank account.

How to calculate and collect VAT properly? ->

Transfer of business assets for private use

As a business owner, you have two identities: business and personal. If you are using any of your business assets for private purposes, you must record the private use as business revenue.

Example 1:

You bought a laptop for your business. After a few years, you don’t need it for your business and start using it for private purposes.

In this case, you transferred or sold your laptop to your personal identity. You must check the current price of a similar laptop on eBay or any other website and record it as revenue. 

Example 2:

You have a company car and also use it for private purposes. In this case, your private identity is using a service provided by your business identity. 

This means your business identity must record it as revenue. Depending on the service, the method of calculating the private usage and revenue may vary.

What is considered an expense in accounting in Germany?

In German accounting, you can divide your expenses into four broad categories.

• Expenses you can deduct immediately
• Expenses you deduct over a period of time
• Expenses you can deduct only at the time of the sale of the asset
• Expenses that you cannot deduct or can only deduct partially

Let’s understand them in detail.

Expenses you can deduct immediately

Expenses you can deduct immediately are the ones you incur in your daily business operations. These include

• Rent,
• Salary payment of your employees,
• Internet, telephone, 
• Software subscriptions,
• Office stationary,
• Tax advisor fee, etc.

You must keep the invoices for all these expenses. These expenses are deducted from your revenue to determine the profit.

Expenses you deduct over a period of time

Certain types of expenses can only be deducted in installments over time. This is also called depreciation.

Fixed assets that stay in your business for a long time come under this category of expenses. This includes,

• Machinery,
• Car,
• Office furniture,
• Office building (not the land on which the building is constructed), etc.

You depreciate the cost of these fixed assets over time. The deprecation rate depends on the type of asset. 

Expenses you can deduct only at the time of the sale of the asset

There are assets you acquire for your business that you cannot depreciate or deduct immediately as a business expense. However, you can deduct the acquisition cost of such assets when you sell them.

The assets that come under this category are.

• Stocks,
• Land, etc.

Example:

Suppose your business bought stocks/shares of another company for 10,000€ in 2025. You cannot deduct 10,000€ as a business expense on your 2025 tax return. 

Similarly, you cannot depreciate shares of the company you bought. 

However, suppose you sell the shares of the company for 12,000€. In this case, you can deduct the acquisition cost (i.e, 10,000€) from the sales price (i.e., 12,000€) to determine the profit or loss.

Expenses that you cannot deduct or can only deduct partially

The German tax office classified certain types of expenses as non-deductible or partially deductible. These include,

• Gifts to your business associates
• Entertainment costs
• Additional expenses for meals on business trips
• Administrative and warning fines, bribes, etc.

Can you deduct expenses you incurred before registering your business?

Yes, you can deduct the expenses you incurred before registering your business. The tax office understands that there are expenses a new founder may incur even before they have registered their business.

So, the tax office allows you to claim such expenses. However, these expenses should be related to your business. 

Moreover, many founders start using their private assets for business purposes. You can also deduct the current value of these private assets as a business expense. 

For example, you started using your personal laptop mainly for business purposes. In this case, you can deduct the current value of your laptop as a business expense. 

The same applies to other personal items you start using for business purposes. For example, a printer, a chair, a desk, etc.

GoBD-compliant accounting

Now you know which bookkeeping method you must use. The next step is to make your accounting GoBD-compliant. 

GoBD outlines a set of principles for managing accounting and storing tax-relevant business records in Germany. Every business in Germany must follow GoBD guidelines.

What are the consequences of NOT following the accounting regulations set in GoBD?

Suppose the tax office finds out that your accounting processes and software are not GoBD compliant. In this case, the following happens.

• The tax may reject your accounting and no longer trust your profit/loss statements.
• If the tax office rejects your accounting, it’ll estimate your profits. The tax office often estimates significantly higher profits. This leads to a higher tax burden.
• In the worst-case scenario, you may be charged with tax evasion. 

GoBD compliant accounting software ->

What are the principles of GoBD for accounting in Germany?

GoBD principles	Explanation
Documentary evidence	You must record every transaction with its relevant document (e.g, invoices, receipts, etc.)
Complete	You must record every detail regarding the transaction. Example: – Type of product you sold or purchased – Time of the sale or purchase – Information regarding the service recipient or provider And, retain the original documents till the retention period ends.  How to issue GoBD-compliant invoices in Germany? ->
Accurate	The records must truthfully reflect your company’s financial situation (assets, liabilities, and equity). Example: If you take out a loan of €10,000 and buy furniture for your company, your company now owns furniture worth €10,000 as an asset. At the same time, your company owes €10,000 as a liability (the loan).
In order	You should record the transactions along with tax-relevant documents in a systematic and organized manner. Example: You receive an invoice from a supplier ‘A’, you regularly buy from in March 2025. Store the document in your system in a systematic order like: Expenses → Supplier A → March 2025
Timely recorded	You must record and document your transactions in a timely manner. – Non-cash business transactions should be recorded within 10 days. – Vendor transactions should be recorded within 8 days. – Cash transactions should be recorded daily.
Traceable	The documents and any changes to them must be traceable. This can be achieved by storing each document separately in a Document Management System (DMS). Your software should also maintain a version history of the document. This way, the tax office can easily audit when and what changes were made to a particular document.
Immutable	The documents you create may not be changed later. For example, suppose you issued an invoice to one of your customers. The software you are using mustn’t allow changing the issued invoice later. The same applies to other kinds of documents, such as a quote.

Learn more about GoBD here ->

What are common accounting mistakes new founders make in Germany?

Accounting and Bookkeeping may feel complicated (which it is) at first. As time passes, you’ll get used to it. 

There are some common accounting mistakes many new founders make. Knowing them in the beginning can save you a lot of time and money.

#1 Including your health insurance contributions as business expenses

The most common mistake new founders make is listing health insurance as a business expense.

As a business owner, you have two identities: private and business. If you buy or use anything for your private identity, it’s a private expense.

Based on this principle, the health insurance you get to insure your private identity is a personal expense. This means you cannot add it to your business expenses.

The confusion usually arises because you can deduct your health insurance contributions from taxes in Germany. However, you do so from your private income tax return.

The same applies to other types of insurance you take for your private identity. On the other hand, you can add the insurance costs as business expenses if you get it for your business identity.

For example, suppose you have employees. In this case, you, as an employer, pay half of their health insurance contributions. You can add this health insurance payment as a business expense. 

Here are some examples of insurance you get for your private and business identity.

• Insurance policies for your private identity: health insurance, term life insurance, personal liability insurance, etc.
• Insurance policies for your business identity: business liability insurance, car insurance for company cars, employees’ health insurance, etc.

How to hire your first employee in Germany? ->

#2 Deducting insurance tax as input tax during VAT return

Many new founders confuse insurance tax (Versicherungssteuer (VSt)) with VAT (Umsatzsteuer (USt)).

Insurance tax is a tax you pay on your insurance. Insurance companies collect the insurance tax (Versicherungssteuer) from their customers and pay it to the tax office. 

As both the insurance tax and VAT are 19%, new founders confuse the two. Here is what you should keep in mind.

• You cannot deduct insurance tax as input tax during your VAT return.
• If you took out insurance for your business, you deduct the gross amount (including insurance tax) as a business expense. 

Different types of taxes in Germany ->

Learn everything you should know about VAT in Germany ->

#3 Incomplete information on entertainment receipts

Another common mistake new business owners make is omitting essential information in hospitality receipts (Bewirtungsbelege). A hospitality receipt is the expense you incur for entertaining your team members.

You may incur such an expense when organizing a team event, celebrating a product launch, meeting an important client for lunch, etc. To claim such hospitality expenses, your receipt must contain the following information. 

• Name and address of the restaurant or event location
• Date
• List of food and drinks
• Tip
• Net and gross amount
• Tax rate
• Names of all the participants
• Signature of the host
• A detailed reason for the entertainment: The hospitality reason should not be vague, like “business lunch” or “meeting”. It should be specific and detailed, like “Product launch event”

If the invoice amount is more than 250€, the receipt must contain the following additional information.

• Name and address of the host or company
• Invoice number
• Tax number or VAT ID of the company where you hosted the event (restaurant, hotel, venue, etc.)

NOTE: When it comes to entertainment expenses, ensure that the costs are proportional to the size and worth of your company. If the hospitality expenses are too high, the tax office won’t recognise them.

#4 Handling bank charges incorrectly

Most businesses nowadays collect payment online via services like Stripe, PayPal, and credit cards. All these platforms charge a fee. This fee is called a “bank charge”.

Bank charges are business expenses, and you must record them accordingly.

The mistake new founders make

• Suppose the sales price of your product is 100€, and the customer paid it via PayPal. 
• The payment first came to your PayPal account. Later, it enters your business bank account. However, PayPal deducts its fee before transferring the payment. 
• Let’s assume PayPal charges 5€. In this case, you’ll receive 100€ – 5€ = 95€ in your business bank account.
• The mistake many founders make is entering 95€ as the revenue instead of 100€.

How do you do it correctly?

• You record the whole invoice amount as revenue, which is 100€ in this example.
• You record the PayPal fees, i.e., 5€, as an expense.
• This will lead to a 95€ revenue.

Why should you care?

• Suppose you record 95€ as the revenue. This means you pay 19% VAT on 95€ instead of 100€. This reduces the VAT by 80 cents. It may seem like a small amount. However, over the year, your revenue might reach 10,000€ or 100,000€. So, the mere 80 cents will become a large sum. VAT is the top revenue source for the tax office, and they closely monitor transactions to ensure they receive the full amount.
• If the tax office discovers that you miscalculated VAT (knowingly or unknowingly), you may face fines and be required to repay VAT payments retrospectively.
• You qualify for certain benefits based on your business revenue. These include small business regulations, freedom to select single-entry bookkeeping, etc. Thus, you must calculate your revenue accurately.

If you use accounting software, it can help you avoid such mistakes. 

Best accounting software for new founders ->

Not realising VAT errors in EU transactions

When purchasing software, goods, or any other services for business purposes, always mention your VAT ID at checkout. Here are the two reasons why you must mention your VAT ID.

• When you enter your VAT ID, you are treated as a business entity and not a private person. This means the service provider outside Germany will issue a net invoice (i.e., without charging 19% VAT). This is called the reverse charge procedure.
• The tax office considers the invoice without a VAT ID as a private invoice and not a business one. This means you cannot use the invoices without a VAT ID for claiming input tax (Vorsteuer). Suppose the tax office accepted the invoice by mistake. In this case, during an audit, the tax office may demand that you pay the VAT back.

How does the reverse charge procedure work? ->

Next steps

• Open a business bank account ->
• Get a GoBD-compliant accounting software ->
• Hire your first employee ->

References

• https://www.fuer-gruender.de/wissen/unternehmen-fuehren/buchhaltung/#c32797
• https://www.ihk.de/hamburg/produktmarken/beratung-service/recht-und-steuern/steuerrecht/abgabenrecht/aufbewahrungsfristen-geschaeftsunterlagen-1157174
• https://www.buchhaltung-einfach-sicher.de/buchhaltung/grundlagen-doppelte-buchfuehrung
• https://gruenderplattform.de/unternehmen-gruenden/doppelte-buchfuehrung
• https://www.lexware.de/wissen/buchhaltung-finanzen/bewirtungsbelege/
• Neumann, Melchior. Selbstständig machen – Der perfekte Start: Der praxisnahe Leitfaden für die Selbständigkeit: Setup, Steuern, Buchhaltung, Versicherungen, Gewerbe anmelden u.v.m. (German Edition)