Small business accounting is a key aspect of running a business, As it provides information on the financial status and efficiency of the company. Small companies in Bulgaria are subject to certain requirements for keeping accounting, that are simplified compared to larger enterprises, However, compliance with these requirements is mandatory. Here's what accounting for small companies and what are the main duties:

1. Accounting

Small companies are required to keep bilateral accounting, which means, that each financial transaction is to be recorded in at least two accounts - one for debit and one for credit. Basic items include:

• Revenue - Enrollment of all sales or services revenue.
• Costs - Recording all expenses, related to operational activity.
• Assets - fixed assets (e.g. cars, computers) and short -term assets (such as goods and raw materials).
• Obligations - to suppliers, to tax authorities or banks (e.g. loans).
• Capital - Capital and Profits, left in the business.

2. Annual financial statement

Small companies are required to prepare and file an annual financial report (GFO) to 30 June of the following year, according to the Accounting Act. This report contains:

• Balance – shows assets, the company's liabilities and equity.
• Income statement – ​​shows how much income and expenses the company generated during the year and whether it made a profit or a loss.
• Cash flow statement – ​​shows the movement of cash, explaining where they come from and what they are spent on.
• Equity Statement – ​​shows the changes in the company's equity over the year.

Small businesses may use abbreviated forms of financial statements, if eligible for small businesses (for example turnover below a certain threshold and a certain number of employees).

3. Tax obligations

Small companies in Bulgaria are subject to the following tax obligations:

• Corporate tax – the standard rate is 10% on profit.
• Personal income tax – if the company is a sole trader, taxation is carried out according to the order of personal income tax.
• Tax on dividends - when dividends are distributed, tax is payable in the amount of 5%.
• VAT (value added tax) – if the company has an annual turnover over 100,000 BGN, is obliged to register for VAT and charge 20% VAT on your goods and services. Otherwise, registration is voluntary. There is another type of mandatory registration, the so-called partial VAT registration, in transactions with the EU or third countries.

4. Tax returns

Small companies must file tax returns, which include:

• Annual tax return - submitted to 30 June of the following year, in which the profit is declared and the corporate tax is calculated.
• Monthly VAT, if the company is registered for VAT and quarterly tax declarations - if the company paid income to natural persons under non-employment legal relationships in the previous quarter

5. Personnel costs

If the company has employees, must also keep accounting for remuneration and insurance. These costs include:

• Salaries - accrual of gross remuneration.
• Social and health insurance - insurance contributions for LLCs (State social security) and NHIF (National Health Insurance Fund), which the employer is obliged to pay.
• Insurance declarations - monthly submission of a sample declaration 1 and 6 in the NRA, with employee insurance information.

6. Documentation and archiving

Small companies must keep and keep accounting records of all financial transactions, inclusive:

• Invoices – for all purchases and sales.
• Payment documents – for payments made and income received.
• Contracts and agreements - for transactions and contracts with counterparties and employees.
• Tax and insurance documents - including declarations and payment orders for paying taxes and social security contributions.
• Documents must be kept at least 5 years, and some even longer, subject to legal requirements.

7. Cash discipline

If the small company makes cash sales, she must comply with cash discipline rules:

– To use a cash register, which is related to the NRA.

– To issue receipts for each sale.

– To lead and account for all cash transactions and payments.

– To comply with restrictions under the Cash Restrictions Act, about cash payments

8. Registration as a small business

To take advantage of small business relief, the company must meet certain criteria under the Civil Code (Accounting Law), namely:

• Average list number of employees - up to 50 souls.
• Net Sales Revenue – 20 000 000 BGN.
• Book value of assets – 10 000 000 BGN.

Small businesses can use abbreviated forms of accounting statements when publishing and not be subject to a mandatory audit (with some exceptions).

9. Digital accounting

Increasingly, small companies are using accounting software solutions, which automate the process of keeping accounting records and submitting tax returns. Accounting software can make business much easier, saving time and reducing the risk of errors.

Accounting for small companies involves a number of duties, which are key to financial management and compliance with legislative requirements. Proper record keeping is essential, the timely submission of tax returns and the payment of taxes and insurance. Proper accounting helps small businesses maintain good financial control and avoid penalties from tax authorities.

For a detailed consultation, contact the Marilena-Consult EOOD team.