SKR03 or SKR04: which German chart of accounts fits your business?

If you do business in Germany and start double-entry bookkeeping, you soon face an inconspicuous question with long-lasting consequences: SKR03 or SKR04? Both charts of accounts come from DATEV, both are widely used, and both lead to the same balance sheet and the same tax in the end. Even so, you should make the choice deliberately, because it will usually accompany your business for many years.

This guide explains in everyday language what a chart of accounts actually is, how SKR03 and SKR04 differ and which one is customary for whom. You will also learn why switching later means considerably more work than many expect. At the end you will find a short decision aid.

What is a chart of accounts?

Double-entry bookkeeping means every transaction is recorded on two accounts. Each business transaction ends up on a suitable account, such as goods purchases, office rent or the outgoing invoice to your customer. So that not every business invents its own numbering system, there are standard charts of accounts. A chart of accounts is a standardized directory in which every account has a fixed number and a fixed place.

Picture a very well organized address book: every entry has a fixed place, and anyone who knows the system finds any contact immediately. A chart of accounts works the same way. Your tax advisor's office, a new bookkeeper or the tax office during an audit can tell at a glance from the account number what was posted there.

SKR stands for Standardkontenrahmen, German for standard chart of accounts. The two most widely used, SKR03 and SKR04, are maintained by DATEV, the IT service provider of the German tax advisory professions, and are regularly updated for changes in the law. From the chart of accounts you derive your own account plan: the selection of accounts your business actually needs. In practice, that is often only a few dozen out of several thousand possible accounts.

SKR03: organized by business process

SKR03 follows the process structure principle (Prozessgliederungsprinzip). This means the accounts are arranged in the order in which a product or service moves through your business. First comes procurement, then the creation of the product or service, and finally the sale. Goods received, for example, sits in account class 3, ongoing operating expenses such as rent or advertising in class 4, and revenue in class 8.

SKR03 is the older and more traditional of the two charts of accounts. Many tax advisory firms and many established small and medium-sized businesses in Germany have worked with it for decades. If you take over an existing set of books, for instance in a business acquisition, you will therefore often encounter SKR03.

SKR04: organized like the annual financial statements

SKR04 follows the financial statement structure principle (Abschlussgliederungsprinzip). Its order mirrors the balance sheet, that is, the comparison of assets and liabilities under § 266 HGB, the German Commercial Code. It also follows the profit and loss statement (GuV in German), the summary of income and expenses under § 275 HGB. The balance sheet accounts come first, followed by the profit and loss accounts, in the same order as in the finished annual financial statements.

The practical advantage: anyone familiar with the structure of a balance sheet quickly finds their way around SKR04. Figures from the ongoing bookkeeping are easier to carry over to the financial statements because the sorting already matches. That is why SKR04 is often recommended for businesses that prepare a balance sheet, meaning annual financial statements with a balance sheet and a profit and loss statement.

Which chart of accounts is customary for whom?

First, the reassurance: technically, both charts of accounts are equivalent. No law prescribes a specific chart of accounts. German commercial law requires proper bookkeeping, not a particular numbering system. With SKR03 and SKR04 you arrive at the same result.

In practice, however, habits have formed. SKR03 is common among established sole proprietorships, craft and trading businesses, and among tax advisory firms with a long SKR03 tradition. SKR04 is often the choice for corporations such as the GmbH and the UG, the German limited liability company forms, and for new businesses, because its closeness to the financial statements makes year-end work easier.

The most important voice in this decision is your tax advisor. The firm works with your data month after month, prepares your financial statements and knows its own processes best. If you choose the chart of accounts your firm already works with, you save coordination effort and transfer errors. So settle this question before your first posting.

Why switching later takes real effort

Switching from SKR03 to SKR04 or the other way round is possible, but it is not a push of a button. In practice, it only makes sense at the start of a new financial year, the period for which you prepare your financial statements. Switching mid-year would tear apart your ongoing reports.

A switch typically involves this work:

• Every account that has been used must be mapped to the new chart of accounts. This requires a documented mapping table, because the same number can mean something completely different in the other chart.
• The opening balances of the new year must be transferred to the new accounts and reconciled, including open items and fixed asset accounting.
• Prior-year comparisons and the BWA, the German monthly management report that summarizes your figures, are harder to read for one or two years.
• Interfaces, reports and exports, for example for the handover to your tax advisor's office, must be checked and adjusted.

A decision aid in five questions

If you are unsure, go through these questions in order. The answer usually becomes clear quickly.

• Does your tax advisor's office have a clear preference? Then take that chart of accounts. This argument beats almost all others.
• Are you taking over existing books? Stay with the current chart of accounts and spare yourself the conversion effort.
• Are you founding a new GmbH or UG and preparing annual financial statements with a balance sheet? Then SKR04 is the natural fit, because it follows the financial statements.
• Do you come from a field with an established SKR03 practice, such as trade or crafts? SKR03 remains widespread there and is a perfectly solid choice.
• Still unsure? Decide together with your tax advisor, not on your own.