When you own your own business, you need to manage your business finances. You do so by recording your earnings and expenses (bookkeeping). In this way, you make it easier for yourself when you need to file your VAT return and prepare your annual accounts, for example. You need your annual accounts when you declare your profit or loss on your tax return.

On this page you can see videos and read about how you do your bookkeeping and tax accounts, manage your business vouchers and produce invoices.

It may be a good idea to use bookkeeping software. Such software can typically be used for bookkeeping, VAT and tax accounts, invoices, stock management, etc.

You can find bookkeeping software online to match your needs. Moreover, it is often free.

By means of bookkeeping you manage:

  • your income and expenses
  • your debt (your liabilities)
  • the value of your business (your assets: inventory, tools and equipment, receivables, etc.)

See the video: How to do your bookkeeping

See the video: How to do your tax accounts

Accounts: double entry bookkeeping and annual accounts (tax accounts)

You enter your income and expenses in your accounts, which added up is your net profit or loss for the year. This is your income statement (sales/revenue - expenses = your business profit or loss) and it is this result you enter on your tax return.

Moreover, your business balance sheet is also part of the accounts. The balance sheet is the value of your business (assets) and how your business is financed (liabilities).

Each time you have had an income or an expense, you also enter it on your balance sheet (assets or liabilities). In practice, this is called double entry bookkeeping. Do it regularly as it is easy to lose track and it can be difficult to remember the purpose of various expenses.

Together, your income statement (income minus expenses) and your balance sheet constitute your annual accounts. Your annual accounts show all your business' financial activities for the year, and from your annual accounts the Danish Tax Agency (Skattestyrelsen) can see how you have calculated the profit or loss of your business. See also Account and Chart of account for further information.

Examples of how to do your bookkeeping

  • If you have sold goods/services to a customer, you enter it as income in your income statement and as an asset in your balance sheet, as it is money you are owed.
  • If you buy a machine for your business, you enter the amount as a withdrawal from, for example, your business bank account, and as an asset in your balance sheet as the machine is now considered part of the value of your business.

Manage your vouchers

  • Number your vouchers when you do your bookkeeping and write the number on the actual vouchers.
  • Number your vouchers sequentially, 103, 104, 105, etc., for example.
  • You could file your printed vouchers sequentially in a ring binder.
  • Keep your vouchers for five years after the end of the accounting year. You may keep your vouchers electronically.

See the video: How to manage your business vouchers

Do your bookkeeping as soon as possible

You need to record your transactions (sales, purchases, loans, etc.) as soon as possible.

And if possible, you should record your transactions in the order they were made.

You can do the entire bookkeeping or you can hire an accountant, a bookkeeper, an employee or your spouse to do all or some of it. However, as the owner of the business you are responsible for the bookkeeping.

Cash accounts

If your customers pay cash, you need to keep cash accounts. You do so by registering all payments received and made daily. It is sufficient to enter the daily total of all payments received and made if you keep the cash register printout (if you use a till) or your cash daybook (handwritten receipts).

It is your duty to balance your cash in hand with the cash accounts, meaning that you need to count your cash in hand and ensure that the amount of cash in hand balances with the cash accounts. Any difference between the two must be entered immediately.

Please see www.virk.dk for further information in Danish on accounts and bookkeeping.

When you do your accounts (bookkeeping) you need to divide your income and expenses into subcategories such as advertisement, rent, purchase of goods and administration. A category is called an account. You could, for example, enter all your rent entries in one account and name it rent.

If you do so, you will gain a general view of the financial situation of your business.

Chart of accounts

A chart of accounts is a list of all the accounts you use in your bookkeeping. You use your chart of accounts when you prepare your annual accounts and calculate your regular tax and VAT payments.

If you use bookkeeping software you may select a standard chart of accounts. This will then automatically number the various accounts sequentially (advertisement, purchase of goods, etc.). It will also automatically calculate your tax relief when you enter you expenses in the various accounts.

Example of a chart of accounts for a profit and loss account

In the income statement you enter your income and expenses, which combined is your net profit or loss for the year. This is what you enter on your tax return.

Expenses:

Income:

Debit

Credit

  • Cost of goods sold
  • Advertisement
  • Entertainment
  • Rent
  • Cash differences
  • Interest expenses
  • Sales (revenue)
  • Supplier discount
  • Interest income

Examples of a chart of accounts for a balance sheet

You enter your business value (assets) and how it is financed (liabilities) in the balance sheet.

Assets:

Liabilities:

Debit

Credit

  • Tools and equipment
  • Depreciation on tools and equipment
  • Inventory
  • Trade receivables
  • Cash balance
  • Bank
  • Input VAT (VAT deductible)
  • Equity (business profit and assets minus debt)
  • Products for private use
  • Bank overdraft
  • Trade payables
  • VAT
  • Other payables

If you sell goods and/or services subject to VAT, you need to prepare an invoice.

The invoice must state:

  • Sequential invoice number
  • Invoice date
  • Name and address of seller and his/her CVR (business reg. no.)/SE no. (VAT no.)
  • Name and address of the customer
  • Type of goods/services, quantity and price
  • Date of delivery (if different from invoice date)
  • VAT basis, price per unit exclusive of VAT, possible discounts, bonuses and rebates if they are not included in the unit price
  • Current VAT rate
  • VAT amount

You can find an invoice template here (in Danish). Remember to save the invoice as a PDF before you issue it to make sure no changes can be made in it. You should also remember to keep a copy of the invoice for your business accounts.

See the video: How to make an invoice

Simplified invoice requirements

If you sell goods and/or services for less than DKK 3,000 to another business subject to VAT, you may issue a simplified invoice stating:

  • Name and address of your business
  • CVR no. (business reg. no.)
  • Sequential number (invoice number)
  • Date of issue (invoice date)
  • Quantity and type of goods delivered/extent or type of services performed
  • Total invoice and VAT amount

You state the VAT amount by writing that VAT is 20% of the total price inclusive of VAT (which corresponds to 25% of the total exclusive of VAT).

Further information in Danish on simplified invoices in our legal guide (only in Danish)

Electronic invoicing for the public sector

If you sell goods and/or services to the public sector, you need to send your invoices electronically at www.virk.dk.

See the video How to use a simplified invoice

If your business is registered for VAT, you need to prepare VAT accounts showing the VAT amounts to be declared and paid by you. The VAT accounts are an integral part of your ordinary business accounts. It is an advantage if your bookkeeping software can also handle your VAT accounts.

Remember to declare VAT, even if you have had no activities in the filing period (a so-called zero declaration). If you do not file your VAT return, we will assess your VAT for the period in question based on an estimate, and you will be charged a fee of DKK 800. If you do not contact us, you will be charged DKK 800 and an additional charge of DKK 65 for each subsequent assessment we make.

Read about VAT accounts

Please see our legal guide (in Danish) for further legal information.