Financial Accounting and Bookkeeping under Czech Legislation
What the exam tests
This domain checks whether you can apply the Czech Accounting Act (563/1991 Coll.), the implementing decree for entrepreneurs (500/2002 Coll.), and the Czech Accounting Standards to everyday bookkeeping. Expect questions on the chart of accounts, documentary evidence, double-entry mechanics, accruals, and the boundary between accounting and tax.
Core rules
- A Czech accounting unit keeps double-entry books in monetary units and in Czech currency; foreign currency items are translated at the exchange rate defined by its accounting directive.
- The chart of accounts (směrná účtová osnova) is mandatory in structure but not in every analytic account. Class 0 fixed assets, 1 inventories, 2 financial accounts, 3 receivables and payables, 4 equity and long-term liabilities, 5 expenses, 6 revenues, 7 closing accounts.
- Every entry needs a verifiable accounting document (účetní doklad) with the prescribed particulars. Books include the journal, ledger, trial balance, inventory records, depreciation schedule, and closing records.
- The accrual principle applies: revenues and expenses are recognised in the period they relate to, not when cash moves. Provisions, accruals, and deferrals are used where the amount or timing is uncertain.
- Accounting treatment must be consistent, material, and give a true and fair view; accounting estimates must be reviewed.
Worked example
A company buys a machine for CZK 240,000 plus 21% VAT and pays by bank. It is a VAT payer. On receipt: debit 042 (acquisition of fixed asset) 240,000; debit 343 (input VAT) 50,400; credit 321 (supplier) 290,400. Payment: debit 321, credit 221 bank. When put into use: debit 022 (tangible fixed assets) and credit 042. Monthly accounting depreciation starts from the following month under the entity's depreciation plan. The VAT is not part of cost because the company has the right to deduct it. If it were a non-payer, the VAT would be capitalised into 042.
Traps
Putting input VAT into the asset cost for a payer; recording the machine directly in 022 before it is put into use; confusing accounting depreciation with tax depreciation; omitting the document number or the accounting date; using cash-basis entries for an accrual item. Also watch analytic accounts: the statutory chart class is fixed, but the entity must define analytics for its own needs.