How to properly account for electricity generated by a personal photovoltaic device

In the current age of endlessly rising prices and inflation of energy costs, the age of enviromentally and socially responsible investing, increasingly higher amount of companies come to a point, where a business person decides to generate their own electrical energy. This can be done by either installing a personal photovoltaic device, or by renting one for a pre-agreed period of time.

Naturally companies think that this is “A Penny saved is a penny earned“ situation because they lower their material dependency, however, they forget that even generating your own electricity with a photovoltaic device leads to an accounting event, which needs to be accounted.

Slovak legislation does not specify how to account in cases such as generating your own electricity with a photovoltaic voltage, but based on the currently available legislations (the Accounting Act and accounting procedures in double-entry accounting) the generating of electricity for personal use should be considered as an activation.

According to accounting procedures in double-entry accounting the activation of energy/material created for personal use is accounted as:

• credit to 621 – Activation of material and goods
• and debit to expenses, which are created during the generating of energy/material credit to 502 – Energy consumption, since the impact on economic state is neutral (because the electricity is generated for “free“). 

In cases where the electricity is not all used up, what follows is usually the divestment of the unused electricity in the energy market, or storage in a virtual battery, which allows for later use. Even in these cases there are accounting transactions, which a business person is obliged to properly capture in accounting.
 

When divesting personally generated electricity it is accounted as a sale of one’s own product:

• credit to 601 – Revenue generated for own products
• and correspondingly debit to 311 – off-takers.

In the case of personally generated unused electricity it is accounted to off-balance sheet account of accounting class 8 and 9 – Intra-corporate accounting. 

the accounting viewpoint, companies mainly deal with whether to rent, get serviced or buy energies. They tend to easily forget that even “personally“ generated electricity is a relevant accounting event. This needs to be captured via an accounting entry to establish beyond reasonable doubt the completeness of the accounts.