In the recent period, we have come across several Hungarian Tax Office procedures, during which the tax authority checked not only the accounting policy required by the Accounting Act, but also the GL accounts description required also by law, the latter of which companies must not forget to prepare.

Act C of 2000 on Accounting (Act C of 2000) stipulates that an entity who maintains double-entry bookkeeping is required to prepare a GL accounts description, which makes it possible that the books kept under the GL accounts description fully ensure the preparation of the financial statements required by the Act.

The law sets the mandatory content elements of the GL accounts description, which are the following:

• the number and name of each account used by the entity,
• the content of the account, if the name of the account does not clearly indicate it, as well as the titles of increase or decrease in the value of the account, economic events affecting the account and their relationship with other invoices,
• the relationship between the GL account and the analytical record,
• the order of accounting documents supporting the accounts.

The Act on Accounting makes the person authorized to represent the entity responsible for the preparation of the GL accounts description, its continuous maintenance, and the correctness of the up-to-date bookkeeping.

The law also provides for the obligation of the newly established entity or those who switch to double-entry bookkeeping, saying that within 90 days from the date of establishment or by the date of the switch-over the entity switching from single-entry bookkeeping to double-entry bookkeeping is required prepare the GL accounts description.

It is important to know if the entity is unable to send the GL accounts description as specified above when called upon by the tax authority, the entity may be fined HUF 500,000 for non-compliance.

If we can help you in setting up the above-mentioned GL accounts description or in checking the legal compliance of the currently applied system, please feel free to contact our colleagues.

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