The balance sheet and the income statement are the two fundamental financial statements of any company in Switzerland. Together, they form the core of the annual accounts required by the Code of Obligations (CO) and constitute the basis of the tax return.
This guide details the structure of these documents under Swiss law, the valuation principles to follow and the particularities of the Swiss chart of accounts PMC.
The balance sheet (art. 959a CO)
The balance sheet presents the company's financial position at the closing date of the financial year. It is always balanced: total assets equal total liabilities.
Structure of the Swiss balance sheet
| Assets (use of funds) | Liabilities (source of funds) |
|---|---|
| Current assets | Short-term liabilities |
| Cash and short-term securities | Trade payables |
| Trade receivables | Short-term interest-bearing liabilities |
| Other short-term receivables | Other short-term liabilities |
| Inventory and unbilled services | Accrued liabilities |
| Prepaid expenses | Short-term provisions |
| Non-current assets | Long-term liabilities |
| Financial assets | Long-term interest-bearing liabilities |
| Investments | Other long-term liabilities |
| Tangible fixed assets | Long-term provisions |
| Intangible fixed assets | Equity |
| Unpaid capital (-) | Share capital |
| Legal reserves (capital reserves, profit reserves) | |
| Voluntary reserves | |
| Retained earnings | |
| Profit or loss for the year |
Asset valuation principles
The CO (art. 960 ff.) sets the following valuation rules:
- Current assets: valued at acquisition cost or market value if lower (lower of cost or market principle)
- Non-current assets: valued at acquisition cost, less necessary depreciation
- Inventory: valued at acquisition or production cost, or market value if lower
- Receivables: valued at nominal value, less necessary impairment allowances (bad debt provision)
Mandatory reserves
Swiss law requires the constitution of legal reserves:
- Legal reserve from profits: 5% of annual profit must be allocated to the general reserve until it reaches 20% of paid-up capital (50% for corporations, art. 672 CO)
- Legal reserve from capital: share premium and certain other contributions
The income statement (art. 959b CO)
The income statement (or profit and loss account) summarises all income and expenses for the financial year. It may be presented using two methods:
Presentation by nature (most common in Switzerland)
| Item | PMC class | Description |
|---|---|---|
| Net sales revenue | 3 | Net revenue (after deductions) |
| - Material and merchandise expenses | 4 | Purchases, subcontracting, inventory changes |
| = Gross margin | ||
| - Personnel expenses | 5 | Salaries, social charges (AHV, BVG, LAA) |
| - Other operating expenses | 6 | Rent, insurance, maintenance, depreciation |
| = Operating result (EBIT) | ||
| +/- Financial result | 7 | Interest income and expenses, foreign exchange |
| +/- Non-operating result | 7 | Income and expenses outside main activity |
| +/- Extraordinary result | 8 | Extraordinary, non-recurring items |
| - Direct taxes | 8/9 | Corporate income tax (federal, cantonal, municipal) |
| = Profit / Loss for the year | 9 |
Presentation by function
Presentation by function classifies expenses by destination (cost of production, administration costs, sales costs). It is less common in Switzerland but used by some large companies and under IFRS standards.
The link between balance sheet and income statement
The balance sheet and income statement are intimately linked: the profit (or loss) for the year shown in the income statement also appears on the liability side of the balance sheet, within equity. This link ensures the balance sheet balances from one year to the next.
In practice:
- A profit increases equity (and therefore total assets)
- A loss decreases equity
- Dividend distributions reduce equity (but not the current year's result)
Key financial ratios
From the balance sheet and income statement, essential financial ratios can be calculated for business management:
| Ratio | Formula | Target value |
|---|---|---|
| Current ratio | Current assets / Short-term liabilities | > 1.5 |
| Quick ratio | (Current assets - Inventory) / Short-term liabilities | > 1.0 |
| Debt ratio | Total liabilities / Total assets | < 60-70% |
| Equity ratio | Equity / Total assets | > 30-40% |
| EBIT margin | EBIT / Revenue | Sector-dependent (5-20%) |
| Return on equity (ROE) | Net profit / Equity | > 10-15% |
Our SE and ME plans include monthly reporting with these ratios, allowing you to track the evolution of your company's financial health in real time.
Additional obligations for large companies
Companies subject to ordinary audit must produce additional information (art. 961 CO):
- Cash flow statement: cash movements classified into operating, investing and financing activities
- Management report: economic situation, foreseeable developments, significant events after the closing date
- Extended notes: detailed information on management compensation, investments, related party transactions
Common errors in preparing the balance sheet and income statement
- Omission of prepaid expenses: advance payments not carried forward
- Insufficient tax provision: corporate income tax must be provisioned in the accounts
- Unrecorded depreciation: overstatement of asset values
- Missing or insufficient bad debt allowance: doubtful receivables not impaired
- Confusion between expenses and investments: an equipment purchase must be capitalised, not expensed
AX-Fiduciaire tip: A well-presented balance sheet and income statement strengthen your credibility with banks, investors and partners. Our experts ensure your financial statements scrupulously meet legal requirements while faithfully reflecting the economic reality of your business.
Need help with your financial statements? Request a free quote for our annual closing services.