Bookkeeping, accounts and invoices

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.

Watch the video: How to do your bookkeeping

Watch the video: How to do your tax accounts

Watch the video: How to manage your business vouchers

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

You enter your income and expenses in your profit and loss account which give you the annual result of your business. And you enter this result in your tax return.

Read about how you file your tax return at Introduction to tax on own business.

Example of a chart of accounts for a balance sheet

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

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

If you have several sales a day, you will have to balance your cash book every day.

When you balance the cash book, you are checking whether what you actually have in your till matches the sales you have registered on your till.

How to balance the cash book

Follow these four steps to balance your cash book:

1. Make a note of the amount of cash in your till before you open for business.
2. Count the money in your till after you have closed for the day (this is also called the cash count). Count the following:
   • Digital receipts such as credit card and MobilePay sales 
   • Cash
   • Other kinds of receipts such as gift vouchers
3. Calculate the amount that should be in the till (calculated cash balance). Do this by adding the amount you counted in step 1. before you opened your business to the amount of your actual sales. The amount of your actual sales is the same amount as that stated by your till. You can see the total sales from the daily till roll (z-strimmel) or by adding up all your invoices.
4. Compare the amount in your till (cash count) with the amount that should be in your till (calculated cash balance). If these two amounts differ, your cash book does not balance.

Using a form to balance your cash book

You should use a form to balance your cash book, in which you can enter the relevant amounts.

You can download a cash balancing form here (Excel).

The form explains where to enter the different amounts. You can complete the form and save it on your computer so that the most important amounts are added up automatically. Alternatively, you can print the form and do the addition yourself. 

Remember to record your cash balance

Once you have balanced your cash book, make sure that you keep all vouchers such as the daily credit/debit card receipts, the till roll, other vouchers and the form for five years. Other vouchers could be credit notes, simplified invoices or receipts for goods you have paid for with cash from the till.

Remember to enter these vouchers in your books to document the sales for the day. 

If your cash book does not balance, you should also remember to enter the cash difference in your accounts.

Failing to balance your cash book may have consequences

You need to balance your cash book regularly to know the financial situation of your business and to keep the correct records. Furthermore, balancing your cash book is your documentation for your sales, which you will have to produce if we request it in order to approve your accounts.

If you do not balance your cash book, we may reject your accounts and instead estimate your business tax and VAT. This could mean that your business will be charged more tax and VAT and that you risk being fined.

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.

Watch 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.

Watch 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.

Read about VAT accounts

File your VAT return, even if you haven’t sold anything

Remember to file your VAT return, even if you have had no activities in the filing period (a so-called zero declaration ’nulindberetning’). If you don’t 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.

Read more in Danish about estimates.

This is how we inspect your VAT accounts

We collect and analyse data on an ongoing basis and a lot of our inspections are done automatically via our digital processes. This means that most often you don’t even notice that we are inspection your accounts. We are doing our best to guide you, but you are responsible for filing a correct VAT return.