KPiR – what is it?
As the name implies, the Income and Expense Ledger is used to record the company’s income earned and expenses incurred (business expenses). The P&L is, in fact, a simplified form of record-keeping – available only to entrepreneurs whose revenues from sales do not exceed a net amount of €2 million per year.
Important!
Companies that exceed the indicated threshold are required to maintain full accounting. This means that even a one-time excess of the revenue amount obliges the company to establish full accounting. If revenues in the following year fall below the €2 million limit, the company can return to accounting using the Income and Expense Ledger.
What data do we enter in the Income and Expense Ledger?
The P&L must contain information on all accounting evidence and business events – in other words, it is necessary to document in detail every company purchase and sale.
KPiR includes:
- Address details of the company and its name;
- TIN and REGON of the company;
- The title “Tax Income and Expense Ledger” with the month and year on each page;
- Record table.
It is the latter element that will receive the most attention. The table of records must be structured in a specific way – so that all relevant data on company sales and purchases are included.
Items in the inventory table are described with the following data:
- Ordinal number;
- Date of economic event;
- Accounting receipt number;
- Counterparty data (name or company name, address);
- A description of the business event (e.g., payment for accounting services, installment of a company loan or sale of goods);
- Revenue (value of services sold, other revenue, total amount);
- Information on purchased commercial goods and materials;
- Costs (the amount spent on salaries, purchase invoice expenses, etc.);
- Data on research and development costs, included in Art. 26e of the Personal Income Tax Law.
Important!
The number, arrangement and content of the columns in the Income and Expense Ledger are determined by the Finance Minister’s regulation on maintaining the P&L – so it is not possible to maintain the Ledger in any other way.
The Income and Expense Ledger can be maintained electronically and in traditional form. For obvious reasons, the use of computer programs for bookkeeping is much more popular, but it is worth knowing that the written form is still acceptable and functions in law as an equivalent to the electronic form.
Accounting evidence, or what do we enter in the P&L?
The most essential element of the Income and Expense Ledger is the accounting evidence, which is the basis for recording company sales and expenses.
Accounting evidence for the most part is VAT, VAT RR invoices and receipts. Other types of documents are also considered accounting evidence if they certify the fact of an economic operation. These include:
- proofs of postage;
- evidence of bank fees;
- evidence of transfers;
- other evidence of fees;
- daily statements of evidence;
- accounting notes (created to correct entries for business operations resulting from evidence, received from the contractor or provided to the contractor);
- fiscal reports;
- descriptions or specifications of goods and materials (only in conjunction with invoices);
- internal evidence.
Important!
These documents can be considered accounting evidence only if they are described in detail, i.e. include an indication of the parties to the economic operation, the date of issuance of the evidence and the date or duration of the economic operation, identification of the subject of the operation and its value, signatures of the persons authorized to document the operation, as well as a marking that allows associating the evidence with accounting records.
Obligation to keep a KPiR
As we mentioned in the introduction, the Tax Income and Expense Ledger is one of the most frequently chosen forms of recording business events – general accounting is particularly profitable for small entrepreneurs who do not exceed the II tax threshold (do not earn income at the level of PLN 85,528 net per year).
Important!
According to the government’s latest plans, starting in 2021, the amount of money you’ll need to go behind the 2nd tax bracket will increase – up to PLN 120,000 net per year.
However, there are groups that have no choice but to be legally obliged to maintain a P&L. They are:
- individuals earning income from non-agricultural business activities, not taxed on a flat rate;
- partnerships
- general partnerships;
- partnerships.
The designated entities must maintain a P&L at least until their revenues exceed a net amount of €2 million – once this amount is exceeded in a given fiscal year, the entities are required to switch to full accounting.
The full text of the regulations governing this situation can be found in Art. 2, para. 2 Accounting Act.
Other duties related to maintaining a P&L.
Other records
Just keeping income and expense books is not enough. Any entity using the P&L should simultaneously keep records of fixed assets and intangible assets, as well as records of sales.
In addition, if one of the company’s fixed assets are cars used exclusively for business purposes, it will be necessary to keep mileage records to deduct 100% of the costs generated by the vehicles.
Cantor operations are also required to keep records of purchases and sales of foreign exchange values.
Storage of the P&L
The company must keep the books at the place of business or at the company’s headquarters, unless the bookkeeping is handled by an accounting firm, in which case it is at the firm’s headquarters that the relevant documents are kept.
Important!
Even if your company’s books are kept by an office, you should keep the aforementioned sales records at your place of business. It must include: entry numbers, dates of revenue and the amount of revenue. If your company keeps records on a cash register, sales records are not required.
Census of nature
An important obligation when setting up a business is to take a physical inventory as of the start-up date. This inventory is prepared not only at the time of the company’s incorporation, but also at the end of each fiscal year and at the date of liquidation of the business.
A physical inventory is actually a list of all things purchased before the establishment of the company and related to the business, namely: goods and materials for trade, raw materials, semi-finished goods, shortages and usable waste.
Important!
The physical inventory does not include company assets, fixed assets and equipment belonging to the company. So we don’t enter information about the computers we own, office furniture, software or other equipment.
Even if the company does not have any components as of the start date, it is necessary to take a zero physical inventory. Such an inventory appears as the first item in the P&L, marked with the amount of PLN 0.
Closing the Income and Expense Ledger at the end of the year
Like any ledger, the P&L also has an ending, which entrepreneurs create at the end of the fiscal year. This is done by adding up all the amounts in the ledger – if the company has been adding up each column cumulatively throughout the year, their values at the end of December will at the same time provide a summary of annual income and expenses.
After summarizing the columns, you should value the prepared physical inventory and place its value as the last item of the P&L – already after the summary we described earlier. In a properly completed ledger, the valuation of the physical inventory is the last entry.
When closing the P&L, it is also necessary to calculate income by subtracting the cost of income from income.
