AccountingThe page was last modified:
When you do your accounting, you take notes of all your business transactions in the company. According to the Accounting Act, you must account for all your business transactions.
Do you want to have a better view of your company's finances but don't really know how to start? In this short film, you will find out how you can determine whether your company is making a profit or loss. Length: 2:18 minutes.
Film: Get an overlook of your company's economy
This film is in Swedish but you can choose English subtitles. First you have to play the film and then click on the gear for settings in the Youtube menu. Select Undertexter and then Engelska. (Length: 2:18 minutes.)
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).
The Swedish Accounting Standards Board (BFN) is a government authority that issues rules and information materials regarding the Book-keeping Act and the Annual Accounts Act.
What is a business transaction?
A business transaction changes the company's economic position and/or results.
Examples of business transactions are:
- deposits and payments from cash, bank and other accounts
- changes in receivables and debts
- transfers between accounts
- decisions on appropriations
- own deposits and withdrawals
- goods and services purchased and sold
- wages paid
- equipment purchased
Transactions are documented through verifications, for instance invoices, receipts, debt securities, bank statements, and other documents that contain information about the business transaction.
A company's accounts normally consist of:
- vouchers (receipts, invoices)
- day book and general ledger
- income statements and balance sheets
- annual accounts or in certain cases an annual report
Do your accounting digitally
There are many benefits to managing your business digitally, which is often both cheaper and easier. With a digital accounting software you can get a complete solution for both accounting, invoicing, support for submitting your annual report digitally, and links to your bank. You can also receive automatic reminders if someone has not paid an invoice, or if you forgot to send an invoice for a work done.
Keep in mind that the accounting must be in a definite form. This means that what has been accounted for cannot be deleted or otherwise made illegible afterwards. This is why you cannot use a spreadsheet program such as Microsoft Excel.
According to regulations, accounting records must be archived for at least seven years. Some documents needs to be kept 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 email you can save it in digital form.
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 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.
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.
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.
Want to read more about accounting?
On The Swedish Accounting Standards Board's (BFN) website you will find information that applies specifically to limited companies and sole traders.
Frequently asked questions
Responsible: Swedish Agency for Economic and Regional Growth