Bookkeeping, accounting, financial records—it goes by many names. The same applies to managing your company's accounts, even if it is a task many small business owners aren't particularly fond of.
That is a shame, really. Being able to follow a clear, up-to-date overview of your business finances can provide peace of mind and motivation. Plus, it is a legal requirement under the Danish Bookkeeping Act.
Ongoing accounting and bookkeeping
So, if not for the joy of it, then at least out of necessity, you use your bookkeeping to keep track of your company's finances.
When you handle your accounting and bookkeeping on an ongoing basis, you must systematically record your financial transactions. This gives you an overview of:
- Your income and expenses
- The value of your assets, such as inventory and equipment
- Your debt
- The company's value
Most people manage their daily or ongoing accounting and bookkeeping themselves. It is easy using online accounting software such as Billy, Dinero, Uniconta, e-conomic, or Dynaccount, depending on the type of business you have. Perhaps you have a bookkeeper or an accountant who helps you record income, expenses, assets, and liabilities. All these methods are great ways to maintain an overview of your accounts while complying with the Bookkeeping Act.
The Bookkeeping Act
When it comes to accounting and bookkeeping, you cannot avoid the Bookkeeping Act. The Act sets out the guidelines and rules you must follow when recording your transactions. The 4 most important points in the Bookkeeping Act are:
1. Registration and documentation of transactions must be done as soon as possible
The Bookkeeping Act states that transactions must be recorded as soon as possible after they have occurred. This is good accounting practice and makes it easier to meet the requirement that entries must be made in chronological order. Furthermore, it provides a better overview, as you won't forget to record vouchers or lose your old receipts. It is the easiest way to stay on top of your accounting and bookkeeping.
2. Entries must be documented with vouchers
Every entry must be verifiable. Therefore, it is important to attach vouchers to each individual entry. This can be done in paper form, but with the many excellent accounting programs available today, it is naturally also possible (and easier) to store the vouchers directly in the software.
3. Accounting records must not be destroyed or disposed of
This is also a mandatory requirement. It is stated so clearly that there is no need to delve any deeper into it.
4. All accounting records must be kept for 5 years
You must retain accounting records dating back 5 years. This is directly linked to the statute of limitations, which is also 5 years. If the authorities request it, they can demand accounting records from up to 5 years ago.
You can read much more about the rules in The Danish Bookkeeping Act.
Supporting documents
As stated in the Bookkeeping Act, accounting entries must be supported by a document. A supporting document serves as proof for all incoming and outgoing transactions made by the company. This could be, for example, a bill, receipt, or invoice.
Each document is assigned a sequential number when recorded to ensure that all are accounted for.
The minimum requirements for information in a supporting document are:
- Invoice number
- Date
- CVR number (if the customer/seller is a business)
- VAT number and amount (if VAT registered)
- Seller
- Buyer (not always a requirement)
In addition, the documents must comply with the requirements of the Bookkeeping Act.
VAT
If your business is VAT registered, you must maintain VAT accounts for the purchase and sale of goods and services so that you can settle your VAT. The VAT accounts must contain at least one account for input VAT and one for output VAT. Input VAT is the VAT related to your expenses. Conversely, output VAT is the VAT related to your revenue. If you trade internationally, the accounts must also include an account for the purchase and sale of goods and services abroad.
International trade has become much more accessible in recent years. If you use Facebook ads or Google Ads, you are also engaging in international trade.
The VAT amounts to be reported can be found in your general ledger. It is therefore important that your accounts are up to date before reporting VAT. Remember to include all receipts from the VAT period you are reporting for before submitting your VAT return to the Danish Tax Agency.
To be entitled to deduct VAT, the VAT entries must also be documented with receipts that meet the requirements.
Reconciliation
To ensure that your bookkeeping is correct, it is a good idea to reconcile your accounts. It is advantageous to do this on an ongoing basis by generating a bank statement and comparing it with your recorded entries. This keeps the task small and manageable, leaving you with fewer errors to correct at the final year-end closing.
Reconciliation is essentially a check of your accounts and bookkeeping, and it is beneficial to do this regularly rather than just at the end of the year. This way, you avoid having to go through a full year of bank statements to see if they match your records. Going from bookkeeping to the final annual report can quickly become a daunting task.
Here is a list of reconciliations you should remember to perform:
- Bank reconciliation is performed to ensure that the ongoing entries in the bank account match the actual deposits and withdrawals.
- Account reconciliation is performed to ensure that entries have been posted to the correct accounts.
- VAT reconciliation is performed to determine the amount of tax to be paid.
- Accounts payable reconciliation to get an overview of what you owe.
- Accounts receivable reconciliation to get an overview of what is owed to you.
From bookkeeping to annual report
Ultimately, your ongoing bookkeeping and accounting will culminate in an annual report. Depending on your business structure, there are also a number of requirements to be aware of.
If you have a company (such as an ApS), you must file your annual report with the Danish Business Authority. If you have a sole proprietorship, you are not required to file an annual report with the Danish Business Authority, but some banks do require companies to provide one. Therefore, it may still be relevant for sole proprietorships to prepare an annual report, even if there is no requirement to submit it to the Danish Business Authority.
The figures in your bookkeeping form the basis for your annual profit before tax, assets and liabilities, as well as any personnel costs, which must be included in your annual report.
Prepare your annual report yourself
You don't need to be an accountant to prepare your annual report yourself. It’s much like how you don't need to be a bookkeeper to keep track of your ongoing accounts and bookkeeping.
The bookkeeping system you use keeps track of the Bookkeeping Act for you, so you don't have to know all the rules yourself.
At Reportability, we have created an online tool that makes you your own accountant. We have consolidated the Danish Financial Statements Act and tax law into a simple tool that takes you from your bookkeeping to a completed annual report in 5 easy steps, providing you with an overview of the exact figures and boxes you need to fill out on skat.dk.
To get started, create a user account, upload your figures, and answer a series of questions. Our tool then calculates the tax and ensures you find all the deductions you are entitled to. Once that is done, you have gone from accounting and bookkeeping to a complete annual report that you can send to the Danish Business Authority with a single click.
Want to know more about how you can manage your tax and annual report yourself using our tool? You can either contact us via the chat in the bottom right corner or read more about it on our website. Click one of the buttons below.
Summary
It is important to stay on top of your accounting and bookkeeping. To make bookkeeping easier, you can benefit from using one of the bookkeeping systems we mention below. If you want to prepare your annual report on Reportability, you can quickly transfer your bookkeeping data from your accounting system to Reportability.
E-conomic, Dinero, Billy by Shine, Uniconta, Dynaccount, EG Xena, Ofinda, Business Central, or WebFinance.
Bookkeeping systems make it easier to categorize your expenses and income, keep track of receipts, and ensure you comply with the Bookkeeping Act. These systems can also assist with your reconciliation, and they have the added advantage of connecting directly to Reportability, allowing you to prepare an annual report yourself in 5 easy steps or get the exact figures for your tax return (oplysningsskema) when the time comes.
Next steps
Now that you have a handle on the accounting and bookkeeping side of things, you are ready for the next step.
As mentioned above, ongoing accounting and bookkeeping form the foundation of your annual report. Once an accounting period has ended, it is time to prepare the annual report and file it with the relevant public authorities, such as the Danish Business Authority and the Danish Tax Agency (Skat).
If you have a sole proprietorship or a very small business, you are not required to prepare an annual report. However, you may want to learn more about filling out your tax return (Oplysningsskema)!
If, on the other hand, you have a limited company or wish to prepare an annual report voluntarily, you can read our post on the Annual Report.
Click below to find out more about what YOU need to know:
- Everything you need to know about bookkeeping, annual reports, and filing – intro
- The Annual Report – companies
- Reporting to the Danish Business Authority / the tax return form for companies
For businesses:
