The balance sheet

The balance sheet shows the situation of your company at a given moment (usually December 31). This reflects the result of successive changes in assets and liabilities as a result of your business activities.

The balance is therefore mainly a snapshot; This gives you a clear picture of how the company is currently doing financially and whether there is positive or negative equity.

A balance sheet is a summary of the company's financial situation which includes all assets, debts and equity of the company during the financial year.You should in fact view a balance sheet as a concrete overview of your assets, debts and equity at a specific time.The balance is therefore mainly a snapshot; This gives you a clear picture of how the company is currently doing financially and whether there is positive or negative equity.

The profit and loss account

The profit and loss account gives an overview of the turnover and costs of a company in one year. Retrospective of the adopted annual accounts allows you to see whether a company is recording a profit or generating a loss. Small businesses do not have to disclose a profit and loss account.

How is the Dutch profit & Loss Statement drawn up?

In the Netherlands, the preparation of the profit and loss statement is regulated by Title 9 of the Dutch Civil Code, which outlines the requirements for financial reporting by companies. According to this code, companies are required to prepare their financial statements in accordance with the generally accepted accounting principles (GAAP) in the Netherlands. This includes the proper presentation of the profit and loss statement, which is a key component of a company's financial reporting. The profit and loss statement, also known as the income statement, is drawn up to provide a detailed overview of the company's financial performance over a specific period of time, usually a fiscal year. The statement includes information on the company's revenues, expenses, and resulting net income or loss. In accordance with Title 9, the profit and loss statement must be prepared using accrual accounting, which means that revenues and expenses are recognized when they are incurred, regardless of when the cash is actually received or paid. This ensures that the financial statements provide a true and fair view of the company's financial position and performance. Additionally, the profit and loss statement must be prepared in a clear and understandable format, providing sufficient detail to enable stakeholders to assess the company's financial performance and make informed decisions. In drawing up the profit and loss statement, companies must adhere to the specific format and disclosure requirements set forth in Title 9 of the Dutch Civil Code, ensuring consistency and comparability across different entities. Furthermore, the statement must be accompanied by explanatory notes that provide additional information and context regarding the items presented in the statement. Overall, compliance with Title 9 ensures that the profit and loss statement accurately reflects the company's financial performance and enables stakeholders to have confidence in the company's financial reporting.

The notes

A small legal entity only has to state in the notes the number of persons employed and the way in which the balance sheet is drawn up. For a large legal entity, the explanation is more extensive and, for example, the payments to the management are stated. Larger companies must also file an annual report and an auditor's report.

Below is the complete overview of the sections that a company must deposit.

The size of the company determines the financial information that you must disclose. On this page you will find an overview per business class.

Types of investments

In addition, you can see from the balance sheet which investments you have made in the past period and - even more relevant - how you have financed these expenses.

In addition to energy, starting a company often costs money. As a starting entrepreneur you usually have to invest in many things.

Think of:

• investments in relevant business assets (computer equipment, company car, etc.)

• renting or buying a suitable business location,

• developing or developing a goo house style.

Such investments are of course reflected in the balance sheet. It is important to keep in mind that a balance should in fact always be in balance.

That is to say: the amounts on both sides must add up to the same amount.

Your profit and loss statement is an important part of your annual accounts. It will help you understand the financial health of your company. Have you made a profit or a loss in the past year?

In the Netherlands, you as an entrepreneur are obliged to draw up a profit and loss account every year. This is also referred to as the income statement or operating account. As a small business owner, you don't have to make it public.

Your profit and loss statement is an important part of your annual accounts. It will help you understand the financial health of your company. Have you made a profit or a loss in the past year?

In the Netherlands, you as an entrepreneur are obliged to draw up a profit and loss account every year. This is also referred to as the income statement or operating account. As a small business owner, you don't have to make your financial statements public, you could use the exemption clause if your subsidiary qualifies for it.

How do you make a profit and loss account?

Each profit and loss account consists of two parts:

1. The total turnover

2. The total costs

If you subtract the costs of the turnover, you arrive at the profit or loss.

Writing off

Have you made an investment in a product with a value of more than € 450 excluding VAT, which will last more than a year? In that case, you can write off these costs at the end of the financial year. This means that you divide the costs over the number of years that the product is likely to last, and subtract from the income tax.

Only the part that you deduct in the relevant year will be included in the profit and loss account.

To illustrate: if you buy a computer for € 500 that lasts about 5 years, you can deduct a maximum of € 100 each year and add it to the cost side of the profit and loss account.

Different types of Profit and Loss statements

There is not just one way to create a profit and loss account, there are different models to choose from. The Chamber of Commerce works with the functional model and the categorical model. When your company is hardly, or non, active yet, these models are not relevant for you to file your Annual Accounts.

The functional model

In this model you first display the net turnover and then deduct the costs per activity one by one. This is how you calculate the gross margin. This is the best known and most used form of a profit and loss account. See the image of the Chamber of Commerce below for an example.

The categorical model

In the categorical model, the revenues and costs are grouped together in different categories. An example of such a category is the cost of sales. This includes purchasing costs, storage costs, material consumption and salary costs.

You then deduct all operating expenses per category from the operating income. See the image of the Chamber of Commerce below for an example.

What else do you see in a Profit and Loss statement?

Did you know that you can see a lot about potential pain points in your company in your profit and loss account? For example, high costs due to sickness absence can indicate dissatisfied staff.

If you've spent a lot on repairing old equipment (commercial vehicles or laptops, for example), it may be time to invest in new equipment that lasts longer.

Comparing financial years

You can also specific sources of turnover and costs per year. Is your turnover rising, but have the costs increased just as fast? This can has various potential causes.

In any case, check that your purchase fees are not too expensive. Has your turnover decreased significantly, but are your personnel costs the same? Then it may be time to say goodbye to a few colleagues.

We have included an overview below of a standard balance format

As you can see in the image, in principle a balance always consists of a left and a right side.

Assets

On the left (the asset sideAnnual accounts apply for all businesses and are also known as financial statements. the debit side), you name your assets. This includes, for example, money, goods or debtors, which reflect a company's financial situation.

Liabilities

The right side of the column (the liabilities side, also known as the credit side) is reserved for the debts incurred.

These are divided into long-term loan capital (loans with a term of more than one year) and short-term loan capital (loans with a term of one year), plus your equity capital.

What is the difference between fixed and current assets?

• Fixed assets like land, buildings, cars, computer equipment and inventory are balance sheet items of the capital goods that last more than one production process or year, as shown in the annual accounts in the Netherlands.

• Floating assets are - the name says it all - capital goods that only last one production process or even less.

This includes, for example, inventory, but also raw materials, any receivables, debtors and cash, when you prepare the annual financial statements.

How are equity, long-term loan and short-term loan capital distinguished?

The equity literally represents the amount that you have invested in your company as an entrepreneur in the past period.

You must report the so-called long-term loan separately, because this concerns a loan or mortgage with a term of one year or longer.

Short-term loan capital, on the other hand, applies to short-term debt, such as salaries for any employees or theof To prepare the annual financial statements, each payment tax has to be duly noted and filed..

How long does a balance sheet remain valid?

As mentioned, a balance is a snapshot. As soon as you make a new purchase or deliver a product or service to a new customer, you have to update your financial statements in the Netherlands. customer, this will have consequences for the balance sheet.

Balance mutations

In the context of maintaining the company's financial situation, processing a purchase or sale is referred to as a ‘balance mutation’. However, it is not conducive to the overview if you have to process transaction in the balance sheet. It is therefore customary to report these mutations separately in the annual accounts must in the Netherlands.

Keep in mind that the balance transactions should also be in balance. Imagine: you bought new computer equipment for the office employees last summer. 

The costs: fifteen thousand euros.

For the balance mutation in the financial year 2023, this means that you have to add fifteen thousand euros to your current inventory. business bank account same amount must be deducted. In this way, balance or a company’s financial situation remains in check even at the end of the financial year.

Are you still not quite able to draw up the balance?

Do you have serious doubts that everything is correct? Regardless of whether you're a private or public limited company, always submit the balance sheet drawn up by you to an accountant or Deloitte consultant to avoid issues and fines.