Income and Expense Records for Sole Proprietors under the General Tax System: How to Complete the Standard Form

A shop operated by an individual entrepreneur (FOP) under Ukraine’s general tax system must keep income and expense records using the Standard Form approved by the Ministry of Finance Order No. 261 dated 13 May 2021. The entrepreneur may use paper, Excel, or the Electronic Cabinet. The form does not need to be registered with the State Tax Service (STS). Entries are made at the end of each business day on which income is received or expenses are incurred, based on supporting documents.

The form records revenue actually received. Expenses reduce taxable income only under the rules in Article 177 of the Tax Code. Goods require evidence of purchase, payment, and sale: the entire purchase cannot be written off at once. A refund to a customer reduces income, while a return of the goods themselves requires an adjustment to their previously recorded cost. A value-added tax (VAT) payer excludes VAT from income and expenses. The form and supporting documents must be retained in accordance with the time limits in Article 44 of the Code.

Who keeps the form and how to get started

The FOP is responsible for keeping the records. The entrepreneur may ask an accountant to prepare entries and calculations, but must ensure that the information is complete and the documents are available. Sales staff provide information about sales and returns; the employee who purchases goods provides supplier documents; and the owner provides bank statements and evidence of other payments.

The Standard Form under Order No. 261 is for FOPs under the general tax system and individuals engaged in independent professional activity. The record-keeping rules for single-tax payers are different.

1. Open the Standard Form in Ministry of Finance Order No. 261 and preserve its structure with all 11 columns.
2. On the first page, enter your surname, first name, patronymic if applicable, and taxpayer registration number (RNOKPP). If you have formally refused an RNOKPP on religious grounds and have the relevant passport notation, enter the passport details required by the Procedure.
3. Choose how to keep the records and decide who will collect documents and prepare entries each day.
4. Organize document storage so that the required delivery note, receipt, certificate, or payment record can be found by the date and number entered in the form.

If you also produce and sell your own agricultural products, keep separate records for that activity. Separate records are also required for retail fuel sales and for retail sales of alcohol or tobacco products at the address of a fuel retail location, separately from other types of activity. These requirements are set out in paragraph 177.10 of the Code.

Paper, Excel, or the Electronic Cabinet

The Procedure allows paper and/or electronic records. If you use more than one method, reconcile the entries so that one transaction is not counted twice in the totals. Registration of the form with the tax authority and binding its pages are not required. This is confirmed by the STS explanation on Order No. 261.

At the request of a supervisory authority, an entrepreneur who keeps electronic records must provide a properly certified paper copy. Therefore, keep a file with a complete history of entries and check that every column remains legible when printed.

What to enter in all 11 columns

Enter records in chronological order, in hryvnias and kopecks. Accumulate data from the beginning of the year: totals must include all earlier entries and corrections. The formulas below refer specifically to the columns of the Standard Form.

Net income in this form is a tax measure. The cash balance in an account or till may differ because of unsold inventory purchases, debts, transfers between accounts, and the owner’s personal withdrawals.

How to account for revenue and bank fees

Shipping goods with deferred payment does not, by itself, mean that the FOP has received monetary income. Record revenue after payment has actually been received. An advance payment received is also included in income; if you refund it to the customer, show the refunded amount in column 3.

For bank and online acquiring transactions where a fiscal receipt is issued, the STS considers the date of that receipt to be the income date. Income includes the full revenue, including any fee withheld by the bank. This procedure is explained by the STS in its explanation of the income date for acquiring transactions.

For example, a customer paid 1,000 Ukrainian hryvnias (UAH), the bank withheld UAH 20 and transferred UAH 980. An FOP who is not a VAT payer records income of UAH 1,000 in column 2. The UAH 20 fee is separately included in column 9 after it is actually withheld, provided the entrepreneur has a bank document substantiating the expense. Recording only UAH 980 would understate revenue and fail to show the fee separately.

Reconcile fiscal receipts with the bank statement. If the bank credited the payment the following day, do not record the same revenue again. Likewise, depositing cash revenue already recorded into the owner’s business account remains a transfer of those funds; do not include it in income a second time.

A VAT payer excludes VAT included in the price of goods, works, or services from income and expenses. For example, for a sale of UAH 1,200 that includes UAH 200 VAT, UAH 1,000 is included in the form as income. Retail excise amounts specified in subparagraph 177.3.1 of the Code are also excluded from income. Under Article 177, a budget grant is not included in business income; the Code provides separate tax rules for it.

When a goods purchase becomes an expense

For a shop, the main checks before entering an amount in column 6 are whether the goods have been paid for, whether they have been sold, and whether income from the sale has actually been received. The documents must make it possible to link the purchase cost to the specific goods sold.

Illustrative example: an FOP paid a supplier for 30 identical items at UAH 200 each, for a total of UAH 6,000. Customers bought and paid for 8 items. Column 6 includes 8 × 200 = UAH 1,600. The cost of the remaining 22 items, UAH 4,400, does not yet reduce taxable income.

If you sell the goods and receive payment first, then pay the supplier later, record the expense on the date of actual payment. The STS explains this situation separately in its explanation about income and expenses in different months. Do not include a cost already recorded a second time as an expense.

What documents are required

For goods, retain documents showing their origin and receipt, proof of payment, and sales documents. For example, the supplier’s delivery note shows what you purchased and at what price, a bank document shows how much you paid, and sales documents show what portion of the goods you sold. A delivery note for goods not yet paid for does not, on its own, substantiate a paid expense.

Among the supporting documents listed in Order No. 261 are a payment order, cash receipt voucher, receipt, fiscal receipt, purchase certificate, certificate of completed work or services provided, and other source documents confirming payment. Enter the relevant document details in column 5 and retain the documents along with the calculation breakdown.

For rent, advertising, delivery, or other services, prepare a contract, documents showing the services were actually received, and proof of payment, depending on the terms of the transaction. An invoice showing the amount due does not, on its own, prove that you paid for the service and may claim it as an expense.

Which other expenses may be included

For each expense, check three conditions: it relates to business activity, is included in the list in Article 177.4, and is documented. Record paid rent, advertising, communications, banking services, and other allowable current expenses by payment date. Goods also have the additional conditions of sale and receipt of income.

• Enter allowable wages and payments for work or services under civil-law contracts in column 7. If taxes were withheld from an employee’s salary, do not count them again as an additional separate expense on top of the salary amount.
• Include allowable taxes, levies, USC, and permit fees paid in column 8. Subparagraph 177.4.3 excludes, among other things, VAT for a VAT payer, excise tax, personal income tax (PIT) on the owner’s own business income, and tax on residential real estate.
• Include expenses under subparagraph 177.4.4 in column 9: rent, communications, advertising, settlement and cash services, allowable property repair and operating expenses, transportation of goods, and other services expressly listed there.

The owner’s personal purchases, undocumented expenses, and expenses outside business activity do not reduce taxable income. The purchase of a depreciable fixed asset also cannot be written off in full immediately as a current expense. Subparagraphs 177.4.5–177.4.6 set out specific restrictions on expenses for the purchase and upkeep of land, residential real estate, and passenger cars.

Illustrative example of completing the form for one day

The FOP is not a VAT payer. During one day, customers paid UAH 10,000 for goods: UAH 4,000 in cash and UAH 6,000 by card. The bank withheld a 2% fee that same day, or UAH 120. The purchase cost of the goods sold and previously paid for was UAH 6,000.

On the same day, one customer returned goods purchased as part of these sales and received a UAH 1,000 refund. The returned goods had a purchase cost of UAH 600 and went back into the shop’s inventory. The FOP’s documented expense for a portion of salary paid that day was UAH 1,000 before tax withholding: the amount after withholding was paid to the employee, and the withheld taxes were remitted to the budget. The FOP also paid UAH 500 in rent and UAH 300 in an allowable levy related to the business. All amounts and documents in this example are illustrative; there is no depreciation and the bank did not refund its fee.

Total recorded expenses are UAH 7,320.00. Net taxable income for the day is UAH 1,680.00. The table shows the day’s total; the entrepreneur retains the breakdown and details of all documents to substantiate the amounts.

How a return changes the calculation

Before the return, net income in the example would have been 10,000 − 6,000 − 1,000 − 300 − 620 = UAH 2,080. The return reduced revenue by UAH 1,000 and also reduced the goods expenses included by UAH 600. Therefore, net income fell by UAH 400: 2,080 − 400 = UAH 1,680.

If a return occurs after the sale has already been entered in the form, show the refunded amount in column 3 on the day the customer is actually paid. When the goods are returned to the shop, adjust their cost previously included in column 6. For an electronic form, add a correction row with a negative expense amount. Retain the return documents, proof of refund, and calculation of purchase cost.

If only an advance payment is refunded, and the goods were not delivered to the customer and their cost was not included in expenses, there is no basis to adjust column 6. If the return relates to a year for which the tax return has already been filed, the accountant should also check the reporting consequences.

How to correct entries and calculate totals

On paper, do not obscure the original entry: make a new correction entry and sign it. In Excel or the Electronic Cabinet, add a row with a positive or negative amount that corrects the error. For example, if income was overstated by UAH 200, the correction must reduce it by UAH 200, not enter the entire correct amount again.

To make clear what was changed, retain an explanation referring to the date of the original entry and the relevant document. Record a customer refund as a return in column 3; correct an amount entered by mistake with a correction entry.

At the end of each month, reconcile income against sales documents, cash payments, and bank transactions. Check that fees have been recorded separately, returns are substantiated, and the purchase cost relates to the correct quantity of goods sold. Monthly, quarterly, and annual totals must reconcile with the figures from the beginning of the year; do not add summary rows to turnover a second time.

Order No. 261 provides for using this data in the annual declaration of property status and income. Completing the form and filing the declaration are separate actions for the entrepreneur.

How to keep the depreciation appendix

Depreciation allows the cost of a fixed asset or intangible asset to be included in expenses gradually. Before completing the appendix, check whether a tangible item meets the definition of a fixed asset in subparagraph 14.1.138 of the Code: in particular, its cost must exceed UAH 20,000, and its expected useful life from the date it is placed in service must be more than one year or one operating cycle if that cycle is longer than a year. This cost threshold does not apply to intangible assets. Depreciation is optional for the FOP, who must keep separate records for each asset. Acquisition, production, or improvement must be documented.

In the appendix to the Standard Form, columns 1–3 contain the entry number, asset group, and asset name. In columns 4–5, enter the details of documents for acquisition or production and the document confirming readiness for use, such as a commissioning certificate. In column 6, enter the useful life set by the entrepreneur, which cannot be shorter than the minimum. In column 7, show documented expenses for acquisition, production, and relevant improvements, excluding routine repairs and VAT: paragraph 7 of Section III of Procedure No. 261 defines the depreciable cost this way. In columns 8–9, enter annual and monthly depreciation. In column 10, enter the initial cost of an asset acquired or produced in the current period; for an asset from a previous period, enter the value from column 12 for the prior period. In column 11, show depreciation for the reporting period, and in column 12 show the difference between columns 10 and 11.

Calculate annual depreciation on a straight-line basis: depreciable initial cost divided by useful life. Monthly depreciation is the annual amount divided by 12. Depreciation for a period equals the monthly amount multiplied by the number of months for which it is charged in that period. According to the STS explanation, depreciation for fixed assets begins in the month following the month they are placed in service and ceases from the month following the month they are disposed of. Determine the number of months from the commissioning and disposal documents; do not include the month in which a fixed asset is placed in service in the calculation. Transfer the total from column 11 of the appendix to column 10 of the main form.

Illustrative example: the documented depreciable cost of equipment is UAH 60,000, with a useful life of 5 years. Annual depreciation is UAH 12,000; monthly depreciation is UAH 1,000. If the equipment was placed in service in June and used through the end of the year, depreciation is charged for July–December: 6 × 1,000 = UAH 6,000. Enter this amount in the form once, without including it again in daily expenses.

Land plots, residential real estate, and passenger cars are not depreciated under these rules. Subparagraph 177.4.6 allows routine repair costs and the residual value of fixed assets upon liquidation to be included in expenses for the reporting period, subject to the stated conditions.

How long to retain the form and documents

Paragraph 3 of Section II of Procedure No. 261 requires retention of the Standard Form for three years after the end of the reporting period in which the last entry was made. At the same time, Article 44 of the Tax Code sets time limits for tax documents with a different starting point. Both requirements must be met.

For ordinary documents of an FOP shop not subject to special longer periods, the minimum under subparagraph 44.3.3 is 1,095 days. The period starts on the date the filing for which the documents were used is submitted, or, if the filing was not submitted, on its due date. For documents concerning compliance with other legislation covered by subparagraph 44.3.4, the minimum period is also 1,095 days, but it runs from the date of the relevant business transaction, or, for permit documents, from the date their validity ends. Therefore, before destroying the form and documents, check the period and its starting point for each type of document.

Periods are extended by periods during which the limitation period is suspended in the cases set out in paragraph 102.3 of the Code. For documents from prior years, check suspensions under paragraph 52-2 and subparagraph 69.9 of subsection 10 of Section XX, as well as under paragraph 102.9 of the Code, which was in force through 31 July 2023. The accountant must take into account the versions of these provisions and their exceptions applicable to the relevant period. Do not count overlapping suspension periods twice toward the retention period. For audits not conducted under the relevant wartime restrictions, take into account subparagraph 69.36 of that subsection.

Before destroying documents, the accountant must determine which suspensions apply to the specific period and audit and calculate the final retention date. Retain documents related to an audit or appeal until the relevant procedures and appeal periods have ended, but at least for the period required by Article 44. Documents concerning transactions expressly listed in subparagraph 44.3.1 have a minimum period of 2,555 days. If documents are used for multiple periods, take this into account before destroying them.

As a practical matter, retain the form, delivery notes, certificates, receipts, bank documents, and calculations together, with a backup copy of electronic data. Documents for goods not yet sold and assets being depreciated will also be needed for future entries.

What to do if documents are lost

As a general rule under paragraph 44.5, within five days after documents are lost, damaged, or destroyed prematurely, submit written notice to the STS at your place of registration, following the procedure established by the Code for filing tax returns. Attach documents prepared in accordance with the law that substantiate the event causing the loss, damage, or destruction. If the documents concern the relevant customs procedures, also notify the authority specified in that paragraph. Restore the documents within 90 calendar days, counted from the day after the notice is received by the supervisory authority. If the notice and supporting documents are filed on time and an audit cannot be conducted because of the loss, damage, or destruction of documents, the audit period is postponed until the documents are restored and provided within the time limits in paragraph 44.5, but by no more than 120 days.

This postponement does not apply to audits specified in Article 200 of the Code. If documents are not restored, or are lost, damaged, or destroyed prematurely again after this procedure has been used, paragraph 44.5 provides that they are considered absent when the relevant filing is prepared.

For taxpayers who operated in areas of active hostilities or temporarily occupied territories and cannot present source documents because they were lost or could not be safely removed, subparagraph 69.28 of paragraph 69 of subsection 10 of Section XX of the Code provides a special procedure. Before submitting notice, the entrepreneur checks the status of the territory where they operated and the relevant dates in the official List of Territories determined under the procedure established by the Cabinet of Ministers of Ukraine. To apply subparagraph 69.28, the circumstances must involve an area of active hostilities or a temporarily occupied territory and the specific inability to present documents provided for by that subparagraph.

The entrepreneur addresses a free-form written notice to the supervisory authority at their primary place of registration. The notice states the circumstances of the loss or inability to remove documents, the tax periods, and a general list of source documents, with identifying details where possible. The notice may be sent through the “Correspondence with the STS” menu in the private section of the Electronic Cabinet, or submitted on paper to any operating taxpayer service centre: in person, through an authorized representative, or by post with delivery confirmation and an enclosure list. If, after notifying the authority that documents could not be removed, the entrepreneur learns that the documents have been lost, a separate notice of the loss and its circumstances must be filed.

Loss not related to hostilities does not qualify for subparagraph 69.28. If the procedure is properly applied, the absence of source documents alone is not grounds to reject the reported figures for the specified periods. After notice that documents could not be removed, the STS does not conduct documentary audits of the periods identified in it. After notice of lost documents under subparagraph 69.28, the STS does not audit the specified periods, including after martial law ends. For periods identified in the notice, subparagraph 69.28 prohibits increasing declared tax liabilities, the negative amount of the corporate income tax base, or claimed VAT refunds.

If the STS refuses to apply the procedure, it must issue a reasoned decision within one month of receiving the notice, setting out the grounds and evidence for refusal. The entrepreneur may appeal administratively or in court. Until a final decision in the case, the STS may not question the reported figures or initiate any audit of the periods identified in the notice. The procedure for notice is explained by the STS in its explanation about inability to remove or loss of documents.

Penalties for record-keeping violations

For failure to retain tax documents for the periods required by Article 44, or failure to provide their originals or copies to the STS during tax control in the cases provided by the Code, paragraph 121.1 sets a fine of UAH 1,020. For failure to provide documents, this paragraph contains an exception for documents obtained from the Unified Register of Tax Invoices. For the same actions, if a fine for such a violation has already been imposed within the preceding year, the fine is UAH 2,040.

For failure to keep required income and expense records, or keeping them improperly, Article 164-1 of the Code of Ukraine on Administrative Offences provides for a warning or a fine of 3 to 8 non-taxable minimum incomes. If the person repeats the same violation within a year after an administrative penalty, the fine is 5 to 8 non-taxable minimum incomes.

As a general rule, an expense without supporting documents does not reduce taxable income. Paragraph 44.6 provides that documents substantiating filing figures that are not provided by the end of an audit or within the time limits in paragraph 86.7 are deemed absent when the filing is prepared. This provision has an exception for seizure or other removal of documents by law enforcement authorities. Documents submitted after an audit but before a decision is made under paragraph 86.7 must be taken into account by the STS. The special rules in subparagraph 69.28 described above apply to properly notified cases of loss or inability to remove documents because of hostilities.

Financial records for cash, accounts, and expenses in Torgsoft

Financial accounting in Torgsoft helps bring together shop transactions for the owner and accountant. In the “Payment — Financial Document” mode, the user can view the movement of funds in tills and settlement accounts and manually add the required incoming and outgoing transactions. Rent, bank fees, and other expenses can be allocated by financial analysis category.

For complete records, every actual transaction must be recorded and accounts reconciled against bank statements, and tills against counted cash. Section 12.5 of the Torgsoft instructions explains an important distinction: “Deposit revenue” moves funds to the selected till, while “Cash collection” removes them from the program’s internal circulation of funds. The owner’s personal withdrawals should also be recorded separately; the program’s category name “Dividends” does not, by itself, determine the tax treatment of a transaction.

This data helps the accountant reconcile sales, payments, and expenses with source documents. The accountant separately determines the tax income date, allowable cost of paid and sold goods, return adjustments, and completes the Standard Form. Torgsoft management data and reports do not replace the Standard Form under Order No. 261 or the tax return. The entrepreneur or accountant separately checks tax figures, keeps the form, and prepares the return for filing.

Official sources

• Order of the Ministry of Finance of Ukraine No. 261 dated 13 May 2021, “On Approval of the Standard Form for Recording Income and Expenses by Individual Entrepreneurs and Individuals Engaged in Independent Professional Activity, and the Procedure for Keeping It”: Standard Form and appendix; Section I, paragraphs 1–5; Section II, paragraphs 1–5; Section III.
• Tax Code of Ukraine No. 2755-VI dated 2 December 2010: paragraphs 44.1, 44.3–44.7, 102.3, 121.1; paragraphs 177.2–177.4, subparagraphs 177.4.1–177.4.9, paragraph 177.10; subparagraph 69.28 of paragraph 69 of subsection 10 of Section XX.
• Code of Ukraine on Administrative Offences No. 8073-X dated 7 December 1984: Article 164-1, parts one and two.
• STS explanation on methods of keeping the Standard Form and the fact that it does not require registration: application of Ministry of Finance Order No. 261 and paragraph 177.10 of the Tax Code.
• STS explanation of the income date for an FOP under the general system for acquiring transactions: full revenue including the bank fee and the fiscal receipt date; paragraph 177.2 of the Tax Code.
• STS explanation of income and related expenses in different months: paragraph 177.2 of the Tax Code; paragraph 1 of Section I and subparagraphs 3 and 6 of paragraph 1 of Section II of the Procedure under Order No. 261.
• STS explanation on notifying authorities that source documents cannot be removed or have been lost: subparagraph 69.28 of paragraph 69 of subsection 10 of Section XX of the Tax Code.