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Accounting and Payroll

Double-entry accounting

Almost every country in the world, apart from some tax havens, has developed its own, specific financial accounting regulation system, which details how entrepreneurs can register their economic activity. A double-entry accounting forms a significant system in the area of accounting.

First Double-Entry Accounting System

The first major step in defining  accounting and its importance for the business world was already recorded in the 13th century. The first double-entry accounting system was developed mainly in Italy and Croatia. The next progress in development was the growing and more sophisticated use and improvement of accounting in practice. As a result, various forms and accounting methods have been differentiated which culminated at the turn of the 18th and 19th centuries by splitting into various forms of accounting, in particular to the English, American, German or French form.

Double-entry accounting has become an increasingly attractive way of accurately recording financial flows in companies. The current principle of double-entry accounting is based on the principle of duality of entries. These entries relate in particular to:

  • Status and movement of assets and liabilities;
  • The difference of assets and liabilities (equity);
  • Revenues and costs;
  • Income and expenses;
  • Financial results.

Legislation

Similarly to other areas of social or economic life, double-entry accounting is materialized and formalized in some ways, which creates a basic framework for accounting. It is thus apparent that double-entry accounting is based on specific legislation which aims to harmonize the way and form of accounting between different accounting units. In particular, the aim is to obtain a solid and transparent picture of company, allowing the state, for example, to control the correct tax collection.

With an aim to unify and make the accounting technically correct, the states had adopted a number of economic laws and legal measures that have shed light to proper management of accounting processes. In Slovakia, the most important of current regulations is the Act No. 431/2002 Coll. on Accounting and the accounting practices, updated on a regular basis. The Slovak Commercial Code even orders some companies to keep double-entry accounts (limited liability company, joint-stock company, associations). In case of entrepreneurs being natural persons, the law allows to choose double-entry accounting.

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