Bookkeeping

Accounting activities include bookkeeping and the presentation of the accounts. Depending on the type of association and the statutory provisions, there are different rules on how the books should be kept and the accounts should be presented.

According to the law (Art. 69a SCC), the board is required to keep records of the accounts of the association. The provisions of the Swiss Code of Obligations with respect to commercial and financial reporting apply here mutatis mutandis. Bookkeeping is necessary to have an overview about the financial situation, the liabilities and assets as well as the operating result (profit or loss) of the association for the financial year. With the implementation of double-entry accounting, the provisions of the Swiss Code of Obligations on commercial bookkeeping are met. Associations that engage in commercial activities in order to fulfil their purpose are obliged to register in the commercial register and are subject to the obligation to keep accounting records.

Larger acquisitions that are in use over several years can be “capitalised”, i.e. they do not affect the current income statement, but are included as assets in the balance sheet. The book value of the acquisition must be adjusted by the loss of value to the actual value by means of a depreciation. There are two main depreciation methods: linear depreciation – in this case the asset is depreciated every year by the same amount – or depreciation as percentage of the book value (= value of the acquisition in accounting) – in this case the asset is depreciated by the same percentage of the book value every year, the depreciation rate remains the same, however, since the book value decreases each year, the depreciation amount also decreases. If the association is liable to tax, only depreciation in accordance with cantonal regulations is permitted.

The association must document its activities, i.e. keep records in the form of written documents such as minutes, annual reports, accounting records and other documents and retain these documents for at least ten years.

The articles of association and, if applicable, the commercial register entry indicate the authorised signatories among committee members. In addition, the rules of operation shall specify who has the authority to spend and commit what amount of funds within a certain period. The limitation of the spending authority, for instance by joint signatures or board decisions, ensures that only authorised withdrawals can be made from the association’s account.

Depending on the type of association, spending on printed matter and mailing accounts for a large amount in the books of an association. Even small amounts should be properly recorded and documented.

Question

The issue of finances does not play a very major role within our association. We trust each other, with the treasurer making deposits and payments. Are we nevertheless required to keep accounts?

Answer

Since 2008, the legal provisions concerning associations in Article 69a of the Swiss Civil Code (ZGB) have contained the following section:

"The committee shall maintain the association’s business ledgers. The provisions of the Code of Obligations on commercial bookkeeping and accounting apply mutatis mutandis".

The committee is therefore required to maintain accounts. Irrespective of this obligation, it is otherwise also important to handle financial matters in a clean and precise manner even if the amounts in question are not significant. While trust is good, finances, in particular, can quickly become a reason for disagreement. The members have the right to know how the money is being collected and spent and the committee should be in a position to provide information in this regard at all times.

Provisions may be made for expected obligations that cannot be accurately quantified, e.g. warranty cases, damage claims, repairs, litigation. Three conditions must be met: An obligation exists (mandatory), there is no financial equivalent, the obligation is probable. Provisions are part of the liabilities. Precautions for renovations, replacements, reorganisations, anniversaries, future projects, further education etc. are not provisions, but reserves. An association can form internal reserves for anniversaries, acquisitions, construction measures, etc. or reserves for payments to third parties: Donations received for a certain project. Reserves are part of the equity.

Question

A member wishes to inspect and recheck the complete accounts (balance sheet and income statements) for the last five years of the association's existence. The member is not part of the committee and thus also has no direct access to the accounts. Is it permitted to deny the member access to the accounts? Or, as a rule, do all members have the right to check the complete accounts themselves or at least to view them?

Answer

The provision of Article 802(2) of the Swiss Code of Obligations (SCO) also applies to associations:
"Unless the company has an auditor, company members have unrestricted access to the company books and files. If the company has an auditor, the books and files may be inspected only if a legitimate interest is credibly demonstrated".

If the association has an auditor, the member in question must therefore justify their interest in viewing the accounts. A general need to check the accounts or distrust do not represent relevant reasons.

Question

Our association was founded in July last year. Is it correct that we only have to prepare our annual accounts at the end of this year and thus also our tax statement?

Answer

The association's annual accounts can be completed as stipulated in the articles of association. For the tax year, however, it is the calendar year that applies. If your association generated a profit during the first six months of its existence and if this profit exceeded the exemption limit, you must complete a tax return. In the cantons of Bern and Lucerne, you are required to register your association with the tax authority.

A chart of accounts is a listing of all accounts used in the accounting system of an association. Associations have some freedom in the choice of a suitable chart of accounts. They can select the accounts that are most relevant for the respective association. It is important that members and the executive committee know on which items money has been spent, where the money comes from, and what the current status of assets and liabilities is. The balance sheet accounts, i.e. assets and liabilities, should be based on the actual assets and liabilities of the association. In concrete terms, this means that if an association has a bank account, its chart of accounts must include a “bank” account or if the association has a loan, a “loan” account must be included in the chart of accounts. With regard to the income statement, i.e. income and expenses, the association is free to choose which accounts it wishes to add to its chart of accounts. The executive committee must consider which information it wants to gain from the accounting. Proportionality is important here: it is only possible to draw relevant conclusions if the individual items are neither too small nor too large (it makes little sense to have an account with a final balance of CHF 15.20). In principle, it is advisable not to have too many accounts in the income statement, as a large number of accounts increases the risk of incorrect postings or of posting transactions of the same kind to different accounts, and incorrect postings lead to a distortion of the information generated in the accounting system. A variety of accounting software is available to help associations manage their accounting. They offer the flexibility to tailor each chart of accounts to best suit the individual association’s needs, adding accounts as needed.

If an association becomes insolvent, i.e. it can no longer settle unpaid bills, this can lead to bankruptcy. Bankruptcy proceedings are opened by a judge either at the request of the creditors or at the request of the association itself (declaration of insolvency). If an association is insolvent, it shall be dissolved by law.

The articles of association can state that in addition to the membership fees, members have to inject money into the association in case the funds are insufficient to cover the association’s debts. In most articles of association, the obligation to make additional payments is explicitly excluded. Since 1 June 2005, the obligation to make additional contributions is no longer required by law but it may still be provided for in the articles of association, if necessary.

If an association can no longer meet its financial obligations, it is insolvent. According to the law, this leads to the dissolution of the association. It may have to declare bankruptcy or petition for a moratorium.

If an association is no longer able to pay its liabilities or if it can no longer cover its debts with its own funds, it is over-indebted. If it becomes insolvent, this can lead to its liquidation or bankruptcy. Both events result in the dissolution of the association.

If the association gets into financial difficulties because funds are scarce and the budgeted expenses are higher than the expected income, and if no other means are available, the association has to devise a recovery plan. It has to adjust the budget and/or raise additional funds. The recovery can consist of austerity measures or of measures to collect additional funds.

In the archives of the association, the most important documents are stored in a systematic and diligent manner to ensure their accessibility for future generations. Not only minutes and annual reports but also photos, newspaper clippings and personal reports can document the history of the association and the work done by volunteers. Business records must be kept for a period of ten years. In some cases, municipalities are willing to keep archives for associations. The archives of an association are especially important at anniversaries.

Question

Our association works with volunteers across Switzerland. They settle travel expenses for the association. For the processing of reimbursements, it is easiest if they send the tickets to the association via e-mail. Do original copies of the relevant receipts (travel costs, etc.) have to be collected? Or is it allowed to scan an original receipt, for example a paper train ticket, and archive it electronically as a PDF.

Answer

Business documents have to be stored for a period of ten years. This also applies to receipts. Generally speaking, an electronic receipt is permitted. It simply has to be stored in a way that allows it to be read for ten years. As we don't really know whether and how we will be able to read an electronic receipt in ten years, the receipts are archived in paper form. Original receipts can thus be scanned and sent to the association but have to be archived by the association as paper receipts for a period of ten years.

The association must document its activities, i.e. keep records in the form of written documents such as minutes, annual reports, accounting records and other documents and retain these documents for at least ten years.

Committee members and other members who take over tasks for the association are entitled to a reimbursement of their expenses such as travel expenses, postage, meals, hotel accommodation, the use of their own infrastructure (PC, printer, telephone, etc.) and material. Expense regulations shall determine the amount of such expenses and whether receipts have to be submitted. If a lump-sum compensation for expenses is agreed, it is indispensable to draw up expense regulations. These regulations may be subject to approval by the tax administration – see the aid “Expenses, Regulations for Expenses, Compensation”. The Zewo quality seal is awarded only to associations that comply with the certification authority’s expense and compensation regulations.

Depending on the type of association, spending on printed matter and mailing accounts for a large amount in the books of an association. Even small amounts should be properly recorded and documented.

The general meeting and each individual member have a legally enforceable right to information towards the management of the association, if they can prove a legitimate interest (for example, to clarify whether they wish to submit a motion to the general meeting or to have access to the membership list for the purpose of convening an extraordinary general meeting). The association itself, on the other hand, has an interest in privacy and must comply with the provisions of data protection laws. This interest in privacy shall be weighed against members’ interest in disclosure and, depending on how much weight it has, the member will receive only partial or no information.

Question

A member wishes to inspect and recheck the complete accounts (balance sheet and income statements) for the last five years of the association's existence. The member is not part of the committee and thus also has no direct access to the accounts. Is it permitted to deny the member access to the accounts? Or, as a rule, do all members have the right to check the complete accounts themselves or at least to view them?

Answer

The provision of Article 802(2) of the Swiss Code of Obligations (SCO) also applies to associations:
"Unless the company has an auditor, company members have unrestricted access to the company books and files. If the company has an auditor, the books and files may be inspected only if a legitimate interest is credibly demonstrated".

If the association has an auditor, the member in question must therefore justify their interest in viewing the accounts. A general need to check the accounts or distrust do not represent relevant reasons.

An association’s administrative and organizational tasks can be simplified by using a corresponding software. There are countless software products ranging from accounting programs with simple payroll administration or address management systems to specific software for associations. Each association should look for a solution adapted to its own needs. As every association has different needs and as the software market is very dynamic and offers a large variety of products, vitamin B cannot give any recommendations, test comparisons or field reports. However, we keep a list with links of providers, which can be requested by email.