Updated last 26.03.2021
What is the accounting process and on what basis is it carried on?
- The accounting is the process of tracing all business transactions that result in changes in the financial position of the company. For example, upon each cash sale of your goods or services you change the financial position of your company by increasing the cash with the money received from the sale and at the same time you increase your sales revenue.
- Accounting is chronological for the business transactions (for example, sales and purchases), which should be justified documentary. In the given example you have to register the sale by means of a fiscal device, have to issue fiscal / system receipt and may have to issue an invoice. The documentary justification requirement is met by the issuance of a document for each economic operation. Various types of accounting documents are required for the different transactions of your company.
- The accounting is based on the double-entry accounting (each transaction affects two or more accounts). In the above example these accounts may include “Cash” and “Sales revenue“. Sole proprietors having net sales revenue for the prior reporting period of less than BGN 50 000 are an exception. They are allowed to report their operations using a single-entry accounting additional books and registers are kept, in which the information about the business operations is reflected – e.g. inventory book, book of income and expenses, etc.
Which are the types of accounting documents?
An accounting document is a hard copy or copy on electronic carrier of accounting information, classified as primary, secondary and ledger:
- The primary document is a carrier of information regarding business transaction recorded for the first time (for example, an invoice, fiscal receipt, payment order, etc.);
- The secondary document is carrier of derivative (summarised or differentiated) information exerted from the primary accounting documents (for example, analytical turnover or batch position by account);
- The ledger is a carrier of chronologically organised information regarding business transactions from primary and / or secondary accounting documents (for example, an main book, company’s non-current tangible assets ledger, such as motor vehicles, buildings, etc.).
|Important to know|
What factors should be in place during the administration of the accounting information / system?
The company’s accounting system should provide the administrator with the following possibilities:
- Chronological entry of the accounting transactions, i.e. recording of the accounting transactions upon their occurrence over time;
- Extraction of analytical and summarised information related to the accounting during a certain period;
- Interim and annual closing of the accounting ledgers, i.e. closing of all accounting transactions in a certain period for the purpose of determining the performance of your business in a specific period of time. The shortest period is any calendar year, but you may agree with your accountant a more frequent basis for the closing of the accounts – quarterly, monthly, etc.;
- Adjustments to existing accounting entries using adjusting entries;
- Application of the individual chart of accounts approved by the general manager of the company, i.e. this is the approved list of accounts in which the transactions of your business are recorded for accounting purposes. There are two types of accounts:
– Balance sheet – for example, these are the accounts for the cash on hand, cash at banks, available non-current assets. They reflect the property position of the business and are used to prepare the so-called “balance sheet“;
– Income and expense – for example, these are the accounts for the sales revenue, the expenses of your business and they are used to form the result of the business and the drawing up of statements such as the well known in the practice “income and expense statement”. The link to the statutory annual accounts, which are based on the accounting information, is available here.
- Application of the accounting policies approved by the general manager of the company.
When the system is an accounting software such software should be developed in compliance with the requirements of the Accountancy Act and the data and input documents processed therein should be in Bulgarian.
|For more information|
Additional information regarding the preparation of accounting documents, administration of accounting systems and the related legislative framework is available in Section II of the Accountancy Act.
Visualisation of the accounting documents preparation process and the administration of accounting information 1.