HGB Basics
HGB accounting explained: how German bookkeeping and statements actually work
If you have run books under IFRS, US GAAP or UK GAAP, HGB accounting will feel familiar in its mechanics and different in its instincts. This page walks through how German accounting actually works: the bookkeeping cycle, the principles that govern it, and how a trial balance turns into the Bilanz, GuV, Anhang and, when required, Lagebericht.
The accounting cycle in Germany
German bookkeeping runs on the same double-entry logic used everywhere: every transaction is posted to at least two accounts, debits equal credits, and the ledgers roll up into a trial balance (Summen- und Saldenliste). The duty to keep these books flows from § 238 HGB for merchants and § 242 HGB for the annual statements.
Through the year you post invoices, payments, payroll and journal entries against a chart of accounts. At year-end you run closing entries — depreciation, provisions, accruals and deferrals, valuation adjustments — and the resulting balances become the annual financial statements (Jahresabschluss). The mechanics are ordinary; the German character comes from the valuation rules applied at close.
The GoB: principles of proper bookkeeping
The HGB does not spell out every situation. Instead it repeatedly points to the Grundsätze ordnungsmäßiger Buchführung (GoB), the generally accepted principles of proper bookkeeping. These require, among other things, completeness, accuracy, timeliness, clarity and an audit trail — no posting without a supporting document (Belegprinzip).
Two consequences matter for foreigners. First, your records must be complete and verifiable, so keep every Beleg (voucher). Second, the GoB carry legal weight: the tax office can reject books that breach them (Verwerfung der Buchführung), so 'roughly right' is not good enough.
Accrual accounting and the matching of periods
HGB accounting is accrual-based (§ 252 Abs. 1 Nr. 5): income and expenses are recognised in the period they economically belong to, not when cash moves. Prepaid and deferred items sit in Rechnungsabgrenzungsposten (accruals and deferrals, § 250), and obligations uncertain in amount or timing go into provisions (Rückstellungen, § 249).
Where the HGB parts company with IFRS is the asymmetry it applies. Under the realisation and imparity principles, you may book profit only once it is realised, but you must book a foreseeable loss as soon as it is probable. Revenue you have earned but not yet invoiced is recognised; a gain you merely hope for is not.
What you end up producing
Bilanz
A snapshot of assets, equity and liabilities at the balance sheet date, in the fixed order of § 266 HGB.
GuV
The profit and loss account for the year under § 275 HGB, by nature of expense or by cost of sales.
Anhang
Notes that explain the accounting policies and give the required disclosures (§§ 284–288); micro entities may omit them.
Lagebericht
A management report (§ 289) required only for medium and large corporations, not for small or micro entities.
Double-entry and the chart of accounts
Most German companies post to a DATEV standard chart of accounts, usually SKR03 (process-oriented) or SKR04 (balance-sheet-oriented). Each account maps to a position in the Bilanz or GuV, which is why a clean chart makes statement preparation almost mechanical.
If your books come from a non-German system, the practical task at year-end is mapping every account to the correct HGB line. Getting that mapping right is where most preparation effort — and most of our AI's work — actually goes.
Closing the year
Year-end close (Jahresabschluss) means finalising the trial balance, posting the closing adjustments, applying HGB valuation, and formatting the results into the statutory documents in German and euros (§ 244). Corporations must prepare within three months (medium and large) or six months (small and micro) of the balance sheet date under § 264 Abs. 1.
In practice you upload a finished trial balance, confirm the account mapping and the size class, and the Bilanz and GuV fall out of it. The judgement — provisions, deferred taxes, disclosures — is what the notes and the management report then document.
Frequently asked questions
How is German accounting different from IFRS in daily practice?
The bookkeeping mechanics are the same double-entry system, but the valuation instincts differ. HGB applies prudence and historical cost, recognises foreseeable losses early, and disclosures scale down sharply for small entities.
What is a Saldenliste?
A Saldenliste, or Summen- und Saldenliste (SuSa), is the German trial balance: a list of every account with its debit and credit totals and closing balance. It is the input from which the Bilanz and GuV are built.
Do I need German accounting software to comply with the HGB?
No. You can keep books in any system as long as they satisfy the GoB and can be mapped to HGB positions in German and euros. The statements themselves must be prepared under HGB, which is what our AI-assisted software does from your trial balance.
What are the GoB?
The Grundsätze ordnungsmäßiger Buchführung are the generally accepted principles of proper bookkeeping — completeness, accuracy, timeliness, clarity and a document for every posting. The HGB references them to fill gaps the statute leaves open.
When does bookkeeping become the annual statements?
At year-end, after closing entries for depreciation, provisions and accruals, the final trial balance is formatted into the Bilanz, GuV and, as required, Anhang and Lagebericht under §§ 242 and 264 HGB.