When starting a business, you must maintain accounting records. This applies to all types and sizes of companies.
Bookkeeping is a system for arranging and managing economic activities (business activities) in a company.
In practical terms, bookkeeping means that you retain receipts, invoices and other documents in order to record and report them in chronological and logical (account-based) order.
Bookkeeping gives you the necessary financial information about the company. It helps you to make financial decisions to steer the company's development in the right direction at the right time.
Bookkeeping also forms the basis for taxing the business. It is where you obtain the details that go on your income tax return.
You must submit an invoice when you sell goods or services to legal entities and entrepreneurs. You must invoice continuously, preferably in direct conjunction with the delivery. Invoices are supporting documents that form the basis for your financial reporting and should be numbered in chronological order.
When the financial year comes to an end, it is time to draw up your annual accounts or annual report. All companies must prepare some type of annual accounts or annual report at the end of the financial year.
The annual accounts are a summary and closure of the ongoing accounts for the financial year. The summary takes the form of a profit and loss account and a balance sheet.
The profit and loss account should provide an indicative result for the period, i.e. the financial year. The balance sheet is a summary of the company's assets, liabilities and equity as of the accounting cut-off date.
An annual report comprises a profit and loss statement, a balance sheet and a management report. The auditors must also review the annual report and produce an audit report.
Content of accounting records
The company's accounting records should consist of:
- supporting documents;
- day book and general ledger;
- income statements and balance sheets;
- annual accounts, and in some cases an annual report.
An invoice should contain details of the seller's and the buyer's services:
- the date on which the invoice was submitted;
- a serial number uniquely identifying the invoice;
- what has been supplied/provided (nature and scope);
- the date on which the goods or services were provided;
- the unit price or total price;
- the price excluding VAT (basis for calculating VAT);
- VAT rate and amount of VAT payable;
- name and address of the vendor and the buyer;
- vendor's corporate identification number (VAT registration number);
- in the case of VAT exemption, a reference to this provision;
- possession of the corporation tax card (F-skattesedel).
Annual report: different rules for different types of companies
The rules for accounts and reports vary for different types of company and also depend on the size of the business.
A sole trading company must prepare annual accounts at the end of the financial year. If turnover amounts to no more than SEK 3 million then simplified annual accounts can be prepared.
A partnership with only natural persons (individuals) as partners must prepare annual accounts at the end of the financial year. If turnover amounts to no more than SEK 3 million then simplified annual accounts can be prepared. Partnerships with one or more legal persons as co-owners must always have an approved or authorised auditor and must submit an annual report to the Swedish Companies Registration Office (Bolagsverket).
Limited companies must always have an auditor and prepare an annual report for submission to the Swedish Companies Registration Office. The auditor must be approved or authorised. From 1 November 2010 onwards, small limited companies can choose not to have auditors.
An economic association must always have an auditor and prepare an annual report. The auditor must have sufficient knowledge and experience of accounting and financial matters to carry out a good audit. The annual report must be submitted to the Swedish Companies Registration Office if requested.
Unlike annual accounts, annual reports are public documents. The Swedish Companies Registration Office is the authority that collects and registers companies' annual reports.
More information on bookkeeping is available in the National Tax Board's (Skatteverket) brochure "Bookkeeping, annual accounts and tax returns".