Double-entry accounting

A new municipal budget law was introduced in the state of Rhineland-Palatinate on January 1, 2007 (or with an option on January 1, 2009). (= municipal double-entry accounting in Rhineland-Palatinate)

This new commercial accounting system is a three-component system. The previous division into administrative and capital budgets is replaced by three pillars:

• Statement of assets (balance sheet)
  
• Profit plan or income statement
  
• Financial plan or financial statement
  

The previous terms income and expenditure are replaced by the terms income (= income statement) and receipts (= cash flow statement) or expenses (= income statement) and payments (= cash flow statement).

The new budget will be product-oriented in future.

Statement of Financial Position (Balance Sheet)

The statement of financial position must present the municipality’s total valued assets as well as the sources of the funds required for them.

Income Statement

The income statement shows all expenses and revenues for a given period. It is essentially equivalent to a commercial profit and loss statement. The net income, whether a profit or a loss, affects shareholders’ equity (as shown in the balance sheet).

Financial Plan/Financial Statement

The financial plan shows all cash inflows and outflows for a given period. The result affects the "Cash and Cash Equivalents" line item on the balance sheet.

The municipal umbrella organizations have compiled extensive information on municipal double-entry accounting in a joint project.