After you start your business, you will be required by law to keep records of account (Book-keeping). 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. All supporting vouchers for your accounts must be kept for seven years.
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Accounting is a system of organization and processing of a company's financial transactions. In practical terms, it involves saving receipts, invoices and other documents, then registering and reporting them in a chronological order (books of original entry or daybooks) and in systematic order (general ledger).
A company's accounts normally consist of:
- vouchers (receipts, invoices, etcetera.)
- day book and general ledger
- income statements and balance sheets
- annual accounts or in certain cases an annual report
The status of your company
By keeping accounts, you obtain essential financial information about the company. You can produce up-to-date progress reports each month that provide you with answers to such questions as:
- 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.
This information helps you make financial decisions to ensure the company develops in the right direction and at the right time. The accounts also form the basis for taxation of your business operations, as they provide you with the information for your income tax return.
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 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 bookkeeping being done correctly.
According to regulations, accounting records must be archived for at least seven years. Some documents you should hold on to even longer, e.g. documents containing information about acquisition of properties.
You should always save the receipt, verification or invoice in the form you received it. For example, if you get a paper receipt, you should save the paper receipt. If you get a digital receipt or invoice by e-mail you can save it in digital form.
Frequently asked questions
Responsible: Swedish Agency for Economic and Regional Growth