The Accounting Year

Here is how I understand the general standard life cycle of an accounting year. I am a programmer and not accountant, but want to understand the general principles of financial reporting standards.

1. Starting a company

(TODO)

2. Daily transactions

2.1. Purchases and sales

Incoming invoices are booked as they come in, as follows:

The net amount is debited into the appropriate cost account.
The VAT which I have to pay to the supplier is debited into the account "deductible VAT to declare"
The invoice total amount is credited into the supplier's account

Outgoing invoices are booked similarily:

The net amount is credited into the appopriate sales account
The VAT which I perceive from the customer is credited into the account "due VAT to declare".
The invoice total amount is debited into the customer's account.

2.2. Payments of invoices

If I pay an invoice to a supplier, then the amount is debited into the supplier's account and credited into my bank or cash account.

If a customer pays an invoice to me, then the amount is credited into the customer's account and debited into my bank or cash account.

3. Salaries

3.1 Statement (TODO)

3.2 Declaration (TODO)

3.3 Payments (TODO)

4. VAT declaration

4.1. The declaration itself

The declaration itself is booked as a miscellaneous transaction which takes out the money from the accounts "deductible VAT to declare" and "due VAT to declare" and put it into "deductible VAT declared" and "due VAT declared".

4.2. Payments

(okay)

5. Amortisations

(okay)

6. The Annual Report

Most countries require companies to give an annual report. That's why accounting practice relies on this yearly rythm.

6.1. Determine benefit or loss

When everything has been booked, then there are a lot of amounts in my "costs" and "incomes" accounts. The difference between income and costs is the benefit (or loss) of the year. This amount is known as soon as the accounting year is closed (theoretically on January 1st).

The General Assembly requires to print out a standardized report where the costs and incomes must be balanced. «The cost/income accounts in the annual report are always balanced because by convention we consider the benefit of the year a cost and the loss of the year an income.»

This is why we must make a last final transaction to close our accounting year:

If there is profit, then it must be debited from a (costs) account 6930 (Profit to report) which is specially reserved for this purpose. The counterpart is credited into another special (passiva) account 1410 (Profit for the period).
If there is loss, then it must be credited from a (income) account called loss to report, and the counterpart is debited into another special (negative passiva) account "Loss for the period".

6.2. Distributing benefit or loss

One decision during the annual General Assembly is what to do with the benefit or loss of the year.