In this section we introduce the accounting obligations that every entrepreneur has.
Who is obliged to keep company accounts?
Every entrepreneur is obliged by law to keep accounts for his company, as stipulated in Article 25 of the Commercial Code:
“Every entrepreneur must keep orderly accounts, appropriate to the activity of his company, which allow a chronological follow-up of all his operations, as well as the periodic drawing up of balance sheets and inventories”.
Self-employed persons are not obliged to keep accounts, but it is recommended that they do so. However, the latter are obliged to keep records of their expenses and income and invoices received and issued.
The accountant or bookkeeper is the person responsible for following and adapting the requirements of the General Chart of Accounts (PGC) to give a true picture of the company. Small and medium-sized companies can opt for an abridged version of the PGC, while others must opt for the normal version.
The two plans are very similar and the only difference is that the abridged plan does not have as many conditions as the normal one.
Requirements to qualify as an SME
The term SME comes from the acronym “Pequeña y Mediana Empresa” (small and medium-sized enterprise). To be classified as an SME, an entity needs to be a company with less than 250 employees and a turnover not exceeding EUR 50 million or an annual balance sheet total not exceeding EUR 43 million.
In addition, the term SME includes three sub-categories of enterprise types by size: micro, small and medium-sized enterprises.
Among the types of SMEs, the smallest is the microenterprise. The entity must have fewer than 10 employees, whether they are employees, partners, temporary workers or owners. The headcount, both in this and in the other categories, excludes persons on traineeship or vocational training contracts, as well as mothers and fathers on parental leave. In addition to the employee criterion, the microenterprise must meet one of two requirements: either it must have a turnover of less than EUR 2 million or it must have an annual balance sheet total of no more than EUR 2 million.
The next category of company types by size within SMEs is small companies. In this case, the number of employees must be less than 50. As in the case of employees, the second criterion to be met is also higher: small companies must have an annual turnover of no more than 10 million euros, or a balance sheet total of no more than 10 million euros.
The largest of the SMEs are medium-sized enterprises. For companies to be classified as such, they must have no more than 250 employees. In this type of company, the annual turnover must be less than 50 million euros, or the balance sheet total must be less than 43 million euros.