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.)
Use bookkeeping software
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.
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.
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.
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 in your tax return.
Read more about tax on own business
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.