Counter account denotes in accounting the account that, in a double-entry booking, represents the counter-posting to a source account. Every journal entry involves at least two accounts: one account on the debit side and one on the credit side. The counter account is the account posted on the opposite side of the entry and thus completes the flow of value.
Basics and legal framework
The use of counter accounts is part of the double-entry bookkeeping principle as required by the German Commercial Code (HGB) for merchants and implicitly by tax regulations (e.g. EStG, UStG). The Principles of Proper Accounting and Documentation (GoBD) require that postings be traceable, complete and accurate. This also includes the clear assignment of counter accounts so that each business transaction remains auditable.
For VAT-related matters the UStG is relevant: for taxable supplies and services, output VAT or input VAT accounts must appear as counter accounts, provided the standard taxation applies. Small businesses under §19 UStG are exempt from VAT postings, which also changes the applicable counter account.
Accounting application and practice
In practice, using a counter account means: when you record a document, select the account that describes the economic event and the counter account that finances the inflow or outflow. The correct selection is important for the balance sheet and the income statement, since different counter accounts affect different account groups (assets, liabilities, expenses, income).
Buchungssatz und T-Konto
A simple journal entry reads: Debit to Credit. Example: you buy office supplies on account for EUR 119.00 (net EUR 100.00 + EUR 19.00 VAT). The journal entry is:
- Office supplies (expense account) 100.00 EUR and Input VAT 19.00 EUR to Trade payables 119.00 EUR
In practice this is often summarized in two positions: Office supplies EUR 100.00 and Input VAT EUR 19.00 on the debit side; Trade payables EUR 119.00 on the credit side. Here the counter account to the expense posting is the account "Trade payables".
Practical examples and specific use cases
Outgoing invoice (sale on credit)
You issue an invoice for EUR 238.00 (net EUR 200.00 + 19% VAT EUR 38.00):
- Trade receivables 238.00 EUR to Sales revenue 200.00 EUR
- Trade receivables 238.00 EUR to Output VAT 38.00 EUR
The counter account to sales revenue and output VAT here is the account "Trade receivables". Upon receipt of payment the counter account to the receivable is the account "Bank" or "Cash".
Payment of an invoice
Example: you settle a supplier invoice by bank transfer for EUR 1,190.00 (incl. 19% VAT). The journal entry:
- Trade payables 1,190.00 EUR to Bank 1,190.00 EUR
Here the counter account to the payable is the account "Bank".
Tips for freelancers and small businesses
For small businesses and freelancers the correct choice of counter account is crucial for meaningful reporting and straightforward tax filing:
- Use a chart of accounts: Work with a standardized chart of accounts (e.g. SKR03 or SKR04). This simplifies assignment and automation through accounting software.
- Document supporting records consistently: Make sure that every posting has a supporting document that clearly shows the counter account. This is important for GoBD-compliant retention.
- Check the small business scheme: If you fall under §19 UStG, no VAT account is used. This affects the choice of counter account for income and expenses.
- Reconciliation and review: Reconcile customer and supplier accounts as well as bank accounts regularly (monthly/quarterly) so that mispostings are detected early.
- Software support: Modern accounting programs suggest counter accounts automatically. Review suggestions and adjust them if a transaction is exceptional.
Properly applied counter accounts provide clear, auditable bookkeeping and simplify the preparation of VAT returns as well as annual financial statements under the HGB and the relevant tax regulations (EStG, UStG).