The Chart of Accounts in Hungary: A practical overview for businesses

The Chart of Accounts in Hungary serves as the backbone of any financial system, organizing financial data in a structured manner to ensure clarity, compliance, and ease of reporting. It is defined by the Hungarian Accounting Act, providing a robust yet flexible framework for businesses to manage their financial activities. Whether you’re navigating balance sheets, preparing profit and loss statements, or managing off-balance-sheet items, understanding Chart of Accounts in Hungary is crucial for compliance and operational efficiency.

This article unpacks the key components of the Chart of Accounts in Hungary, explaining its structure, flexibility and practical applications for businesses.

The Purpose of the Chart of Accounts in Hungary

The purpose of the standard chart of accounts is to facilitate the organization of the accounting of the economic entity by incorporating into a standard system the assets and liabilities of the economic entity and the effect of business operations on its profits and losses, and to provide basic information necessary for the annual account to be prepared in accordance with this Act and with the government decree issued by authorization granted in this Act.

Structure of the Chart of Accounts in Hungary

Balance sheet accounts (Sections 1-4)

Sections 1-4 of the accounts contain balance sheet accounts, sections 1-3 contain the assets, and section 4 contains the liabilities. The accounts of these sections provide the figures necessary for the preparation of the balance sheet.

Section 1 of the accounts includes the accounts used for the registration of intangible assets, tangible assets (including also assets not put into operation and assets in course of construction), and financial investments.

Section 2 of the accounts includes purchased and self-constructed assets.

Section 3 of the accounts includes current assets, with the exception of inventories (liquid assets, securities, trade debtors, debtors, employees and members, the central budget and other organizations), and deferred expenses and accrued income.

Section 4 of the accounts contains the sources of assets. It includes equity, provisions, long-term and short-term liabilities, and accrued expenses and deferred income.

Profit and Loss Accounts (Sections 5, 8, and 9)

The data necessary for the profit and loss account, and for determining the results after tax are contained in sections 5 and 8-9 of the accounts.

Section 5 of the accounts contains the expenses, itemized by cost type. In section 5 of the accounts the cost types are broken down per the following categories: cost of raw materials and consumables, cost of services received, cost of other services, wages costs, other employee benefits, contributions on wages and salaries, and depreciation. A company drawing up its profit and loss account using the nature of expense method shall enter separately within this section of the accounts any change in the capitalized value of own performance in the current year not otherwise qualifying as a cost type or cost recovery, as to cover direct costs of the same amount, as well as the value of unsold performance equalling their direct costs.

Section 8 of the accounts:

• contains material costs – including raw materials and consumables, cost of services received, cost of other services, the cost of goods sold, and the value of services sold (intermediated) -, staff costs – including wage costs, other employee benefits, contributions on wages and salaries -, depreciation write-off and other operating charges, expenses on financial transactions and the amount of tax payable for the profit and loss account prepared by the nature of expense method;
• contains, for the profit and loss account prepared by the function of expense method, the direct costs of sales, the cost of goods sold, the value of services sold (intermediated), and the indirect costs of sales (including sales, marketing, administration costs and other general overhead), other operating charges, expenses on financial transactions and the amount of tax payable.

Sales revenues, other income and income from financial transactions shall be shown under section 9 of the accounts.

Optional and off-balance-sheet accounts

Depending on the decision of the economic entity, sections 6-7 of the accounts may be used for providing information to management. The free use of these sections of accounts permits settlement within the company, as well as the formation of an internal system of cost management and prime cost calculations.

Section 0 of the accounts contains the records of accounts, items of which do not affect the results after tax of the financial year in question nor the amount of equity on the balance sheet date. Off-balance-sheet items shall also be shown under section 0 of the accounts, such as contingent liabilities, commitments emphasizing the contract value of the forward parts of futures, options and swaps transactions as long as the liability remains outstanding, the transaction is performed (concluded), not yet expired as contracted, and the liabilities outstanding due to any commitment in connection with futures, options or swaps.

Flexibility and customization

The Chart of Accounts in Hungary is designed to be flexible, allowing businesses to adapt it to their specific needs. Companies can create sub-accounts within the main account classes to better reflect their unique financial activities and reporting requirements. This flexibility helps businesses maintain compliance with Hungarian accounting standards while also tailoring their accounting systems to their operational needs.

Several accounting software programs are capable of handling two types of chart of accounts, thus ensuring compliance with both the Hungarian accounting law and the company’s unique requirements through mapping.

Establishing and maintaining the Chart of Accounts in Hungary

Economic entities keeping double-entry books shall establish a system of accounts in accordance with the provisions related to the standard chart of accounts, containing facilities for drawing up the annual accounts in full compliance with the relevant provisions prescribed in the Act of Accounting

The system of accounts shall contain the following:

• number and description of all accounts designated for use;
• content of the account, where it does not follow clearly from the description of the account, and the titles of any increase or decrease in the amount under the account, the economic events that affect the account and their relation with other accounts;
• connection between the general ledger account and the analytic registers;
• the system of documentation in support of the system of accounts.

Responsibility for drawing up the system of accounts, keeping it up to date at all times and for ascertaining the correctness of accountancy lies with the person authorized to represent the company.

A newly founded economic entity, which falls under the scope of the Act on Accounting and keeps double-entry books, shall draw up its system of accounts within ninety days of the date of its foundation, while an economic entity switching from single-entry to double-entry bookkeeping, by the date of such transition. In the event of any amendment to this Act, the necessary revisions in the system of accounts shall be carried out within ninety days of the entry into force of the amendment.

The challenges of managing Charts of Accounts in Hungary

Setting up and managing a Chart of Accounts in Hungary comes with specific challenges due to the detailed requirements outlined in the Accounting Act. Companies need to accurately classify assets, liabilities, revenues, and expenses into predefined sections while ensuring compliance with statutory formats. Mistakes in classification, outdated account setups, or incomplete systems can result in compliance risks, reporting errors, and inefficiencies in financial management.

While the flexibility of the Chart of Accounts allows businesses to tailor it to their needs, this requires careful planning and expertise. Companies often face difficulties balancing compliance with the need for internal reporting that supports decision-making. Managing off-balance-sheet items or utilizing optional sections for internal purposes can also add complexity, especially for businesses without a dedicated accounting team or experience in Hungarian regulations.

Outsourcing these tasks to a reliable partner like Accace can save time and resources. With in-depth knowledge of Hungarian accounting standards and practical experience in optimizing Charts of Accounts in Hungary, we ensure accurate setups, efficient reporting, and full compliance. This allows businesses to focus on their goals without worrying about the technicalities of accounting systems.

Simplify your accounting with Accace

Managing the Chart of Accounts in Hungary doesn’t have to be overwhelming. At Accace, we provide comprehensive accounting and reporting services designed to align with Hungarian regulations and your business needs. From setting up a compliant Chart of Accounts to maintaining and optimizing it for internal and external reporting, our experts ensure accuracy and efficiency every step of the way.

Whether you’re a local business or an international company operating in Hungary, we help you navigate the complexities of the Accounting Act, streamline your financial operations, and stay compliant with all statutory requirements.

Explore our accounting and reporting services in Hungary to see how we can support your business and take the burden of accounting off your shoulders.