Tax records vs. accounting: the difference and what you need

Every business owner in the Czech Republic must track their income and expenses. The question is how. The law offers two basic options: tax records and accounting (formerly referred to as double-entry bookkeeping). For many new entrepreneurs, choosing between them is confusing — both systems serve to record business activity, but they differ fundamentally in principle, scope, complexity, and who is required to use them.

In this article, we'll explain how tax records and accounting differ, who must use which system, what their advantages and disadvantages are, and when it makes sense to voluntarily switch from one to the other.

The core principle: income and expenses vs. revenues and costs

The most fundamental difference between tax records and accounting lies in how business transactions are recorded.

Tax records — cash basis

Tax records work with income and expenses, meaning actual cash flows:

• Income is recorded at the moment you actually receive the money (into your account or in cash).
• An expense is recorded at the moment you actually make the payment.

This means that if you issue an invoice in December but the customer pays in January of the following year, the income counts toward the following year.

Accounting — accrual basis

Accounting works with revenues and costs, meaning the moment a claim or obligation arises:

• Revenue is recorded at the moment goods or services are delivered (when the invoice is issued), regardless of when payment arrives.
• A cost is recorded at the moment a liability is incurred (when an invoice is received), regardless of when you pay.

If you issue an invoice in December, the revenue is recorded in December — even if payment arrives in January.

Who must keep tax records and who must keep accounting books

Who may use tax records

Tax records may be kept by individuals (OSVČ) who:

• Are not an accounting entity (i.e., have no legal obligation to keep accounting books)
• Do not apply the expense flat rate (expenses as a percentage of income)
• Are not in the flat-rate tax regime

Who must keep accounting books

The obligation to keep accounting records applies to:

The expense flat rate — a third option

In addition to tax records and accounting, there is the option of applying expenses as a percentage of income (expense flat rate). Under this approach, you only need to track income — not individual expenses.

A detailed comparison: tax records vs. accounting

What tax records look like in practice

If you choose (or are required) to keep tax records, you will need the following books and records in practice:

1. Income and expense journal (cash journal)

The main book in tax records. You record all income and expenses chronologically, broken down into:

• Taxable income — business income that counts toward the tax base
• Non-taxable income — income that does not count toward the tax base (personal deposits, loans received, etc.)
• Deductible expenses — expenses incurred to generate, secure, and maintain income
• Non-deductible expenses — expenses that cannot be claimed for tax purposes (personal withdrawals, loan repayments, etc.)

2. Accounts receivable and payable ledger

A record of unpaid invoices:

• Receivables — invoices you have issued that customers have not yet paid
• Payables — invoices you have received and not yet paid

3. Asset cards

Records of long-term assets (above 80,000 CZK from 2024) and minor tangible assets. Cards include the acquisition cost, date of acquisition, depreciation method, and depreciation amounts.

4. Inventory cards

If you hold stock (goods, materials), you track it on warehouse cards.

5. Payroll records

If you have employees, you maintain payroll records (payroll sheets, pension insurance records, etc.).

What accounting looks like in practice

Accounting is a significantly more complex system. It is based on double-entry bookkeeping — every transaction is recorded on two accounts (debit and credit sides).

Main components of accounting

1. Chart of accounts — the list of accounts used for recording (based on the standard account framework)
2. Accounting journal — a chronological record of all accounting entries
3. General ledger — synthetic accounts with turnovers and balances
4. Analytical ledgers — detailed breakdowns of synthetic accounts
5. Financial statements — balance sheet, profit and loss statement, notes (and optionally a cash flow statement and statement of changes in equity)

Account classes

When it makes sense to switch from tax records to accounting

Even if you are not required to keep accounting books, there are situations where making the voluntary switch is worthwhile:

Situations where accounting pays off

1. You plan to bring in an investor or take out a loan — banks and investors require financial statements (balance sheet and profit and loss statement). Tax records cannot provide these.

2. You have a high volume of receivables and payables — accounting gives you a more accurate picture of your business's actual financial position, because it tracks unpaid invoices too.

3. You plan to convert to an s.r.o. — legal entities must always keep accounting books. If you're planning to transform your OSVČ into an s.r.o., voluntarily keeping accounting books will make the transition smoother.

4. Your turnover is approaching 25 million CZK — it's better to switch to accounting before the law forces you to.

5. You need an accurate picture of your financial situation — accounting provides a more complete view through the balance sheet and profit and loss statement.

Situations where staying with tax records is better

1. Low turnover and simple operations — if you issue a handful of invoices a month and have a straightforward cost structure, tax records are perfectly sufficient.

2. You want to minimise administrative burden — tax records are significantly simpler and you can manage them yourself.

3. You want to optimise your tax base — the cash basis principle allows you to influence, to some extent, which year income and expenses fall into (by timing payments or receipts).

4. The cost of an accountant would outweigh the benefit — accounting typically requires a professional or accounting software, which adds cost.

Switching from tax records to accounting

If you become legally required (or voluntarily decide) to switch from tax records to accounting, there are several steps you need to take.

Changes in accounting legislation for 2026

2026 brings some notable changes in accounting regulation that are worth knowing about.

Amendment to the Accounting Act effective from 1 January 2026

The amendment approved by the Senate introduces two main groups of changes:

1. Increased thresholds for categorising accounting entities — the limits for total assets and turnover are raised by approximately 25%. As a result, some accounting entities may "step down" into a lower category with fewer obligations.

2. Changed rules for mandatory audits — the audit obligation now only applies when thresholds corresponding to a medium or large accounting entity are reached. Small accounting entities are no longer subject to mandatory audit solely on the basis of exceeding financial thresholds.

New Accounting Act (delayed)

A new Accounting Act was originally expected to take effect in 2026, but its implementation has been postponed to 2027 at the earliest. The new act will bring more substantial reforms, including the introduction of international accounting standard principles into Czech accounting.

Tax records, accounting, or flat rate — a decision guide

Frequently asked questions (FAQ)

Can I keep accounting books voluntarily as an OSVČ?

Yes. Any OSVČ can voluntarily choose to keep accounting books instead of tax records. Bear in mind, however, that the minimum period for keeping accounting books is 5 years — you cannot switch back to tax records after a year.

Do I need an accountant if I keep tax records?

No, the law does not require it. You can keep tax records yourself, for example in a spreadsheet or a simple bookkeeping programme. That said, if you're unsure of your knowledge, consulting a tax adviser at least when preparing your tax return is a sensible idea.

What's easier — tax records or the expense flat rate?

The expense flat rate is simpler, because you don't need to track individual expenses — only income. Tax records require tracking both income and expenses. On the other hand, the expense flat rate only pays off if your actual expenses are lower than the applicable flat-rate percentage.

How does the tax base differ between tax records and accounting?

Under tax records, the tax base is the difference between income and expenses (cash basis). Under accounting, the tax base is the net income (revenues minus costs), adjusted by items that increase or decrease it under the Income Tax Act. In practice, the tax base can differ significantly between the two systems, especially due to the timing of payments.

Can I keep tax records in Excel?

Yes, the law does not specify which software you must use. Excel or Google Sheets are perfectly adequate, provided you record all required data (income, expenses, receivables, payables, assets). What matters is accuracy and completeness — not the tool you use.

What happens if I'm required to keep accounting books but only keep tax records?

Failing to meet the legal obligation to keep accounting books can result in a fine of up to 6% of total asset value (under § 37a of the Accounting Act). In addition, the tax authority may determine your tax base using indirect methods during an audit, which is typically less favourable.

Do I need to change my accounting software when switching to accounting books?

It depends on the software. Some simple programmes for tax records do not include an accounting module. However, most more advanced accounting applications support both tax records and full accounting. When switching, it's important to ensure data continuity and that the accounting books are opened correctly.

Keep your tax records stress-free with DokladBot

Whether you're already keeping tax records or still deciding which system to use, DokladBot helps you with the most important part — tracking income and expenses. Simply forward an invoice or take a photo of a receipt via WhatsApp and DokladBot automatically records the income or expense, categorises it correctly, and prepares the documents you need for your tax return.

No complicated accounting software, no manual spreadsheet entry. Just capture your documents as they come in — right from your phone.

Try DokladBot at dokladbot.cz — tax records via WhatsApp, simple and straightforward.

Useful links to official sources

• Financial Administration — tax records — information on OSVČ obligations
• Ministry of Finance — new accounting legislation — information on the new Accounting Act
• MOJE daně portal — file your tax return electronically
• Act No. 563/1991 Coll., on Accounting — full text of the act

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This article is for informational purposes only and does not replace professional tax or accounting advice. For specific situations, we recommend consulting a tax adviser or accountant. Information is current as of the date of publication (February 2026).