How to do your accountingThe page was last modified:
After you start your business, you will be required by law to keep records of account. This accounting obligation applies to all persons who run a business activity, regardless of the form of the business or the scale of its operations.
What is accounting?
Accounting is the practical work of continuously recording various events such as purchases and sales in different accounts, this is called bookkeeping. It is also a system for organising and processing financial events (business transactions) and financial information in an enterprise.
Accounting involves bookkeeping which means organising your business transactions such as receipts, invoices and other source documents to register and record them in order of registration (books of original entry or daybooks) and in systematic order (general ledger). But accounting also includes categorising accounts, analysing, making budgets, profit and loss accounts, balance sheets and other reports. It may also include analysing and reporting other economic and financial information throughout the enterprice.
In accordance with Sweden’s Book keeping Act (bokföringslagen), all business transactions in your enterprise must be recorded in daybooks and general ledger.
The accounts are always closed with an annual account or an annual report, depending on the form of the business. This is regulated in the Swedish Annual Accounting Act and standards of the Swedish Accounting Standards Board (BFN).
The enterprise’s accounting consists of:
- Supporting vouchers
- Books of original entry (daybooks) and general ledger
- Profit and loss statement and balance sheet
- Other financial reports
- Annual accounts or in some cases, an annual report
Accounting provides information on the status of the enterprise
From your accounting, you can each month produce up-to-date progress reports that provide you with answers to questions like:
- What was the profit/loss for the month?
- What was the profit/loss in comparison with the previous month or year?
- What does this mean in the short term and how will the business be affected in the longer term?
- How much money can you take out of the business?
The information from your accounting can help you when making the financial decisions that you must make for your business.
Others also want to know how your business is going
Besides yourself, there are a number of stakeholders who are interested in how your business is going and how it is being managed. By having your accounts in order, these stakeholders can get information about your business.
These stakeholders might include:
- Financiers, when you need to borrow money, the bank or another financial institution will want to know that your business is creditworthy.
- The Swedish Tax Agency, for accounting of VAT, social security contributions and preliminary tax.
- Suppliers, where you wish to trade on credit (payment against an invoice).
- Customers, long-term collaborations often require that you demonstrate sound finances.
- Investors, if you want them to become co-owners or inject venture capital.
You can do your accounting manually in double entry daybooks or use accounting software. If you have many business transactions in your business, it is easier to use accounting software. You are not permitted to do your accounting in a general spreadsheet program such as Microsoft Excel. You must use specialised accounting software that has been adapted to current accounting legislation.
There are many accounting software packages on the market. You will generally have the option of testing the software for a certain period of time before you need to buy a software license. Choose software that is easy to understand and compare what kind of support you are entitled to.
Do accounting yourself or hire help
For many new entrepreneurs, accounting can be difficult since it takes time away from actually running the business. There are also many rules you need to learn and comply with. If you choose to hire a consulting accountant, accounting firm or other professional help, you will be relieved of this workload and gain an expert to discuss matters with.
You are responsible for the accuracy of the accounts
Please note that even if you have hired help, as the business owner you are ultimately responsible for your accounting being done correctly.
All supporting vouchers for your accounts must be kept for 7 years.
Statistics to Statistics Sweden (SCB)
In some cases, you must also provide statistics to Statistics Sweden. If this is the case you will be contacted by Statistics Sweden.
Responsible: Swedish Agency for Economic and Regional Growth