Chapter 1: Budget & Planning
Before you start - create your budget and understand liquidity
Before Starting Your Business
When you start your own business, you begin with an idea – a business idea. This must be clothed in economic terms – a budget. To get started with the business, you need to make certain purchases. You get the first expenses.
Types of Budgets
📊 Result Budget
Forecasts your expected income and expenses for the year. Shows if your business idea is profitable.
Example Components:
- Sales revenue
- Cost of goods sold
- Operating expenses
- Depreciation
- Interest expenses
💰 Liquidity Budget
Shows when money comes in and goes out. Essential for cash flow management.
Why Important:
- Ensures you can pay bills
- Identifies financing needs
- Helps plan investments
- Prevents cash shortages
Understanding Liquidity
Liquidity refers to how easily you can convert assets into cash to meet short-term obligations. Even profitable businesses can fail due to poor cash flow management.
Cash Flow Cycle
Basic Bookkeeping Concepts
What is Bookkeeping?
Bookkeeping is the systematic recording of financial transactions. It provides the foundation for all financial reporting and decision-making.
Purpose
- Track business performance
- Meet legal requirements
- Prepare tax returns
- Support loan applications
- Make informed decisions
Double-Entry System
Every transaction affects at least two accounts. The total debits must always equal the total credits, ensuring the books balance.
Understanding Depreciation
Depreciation allocates the cost of long-term assets over their useful life. Instead of recording the full cost as an expense when purchased, you spread it over several years.
Example: Computer Purchase
Cost: $3,000
Useful Life: 3 years
Annual Depreciation: $1,000
Personal vs. Business Money
One of the most important principles in bookkeeping is separating personal and business finances. This separation is crucial for:
- Legal compliance
- Tax accuracy
- Financial clarity
- Professional credibility
✅ Using Personal Money for Business
- Record as "Owner Contribution" (increases business equity)
- Create documentation of the transaction
- Keep receipts for all business expenses
❌ Using Business Money for Personal
- Record as "Owner Draw" (decreases business equity)
- Not a business expense for tax purposes
- Must be properly documented
Chapter 2: First Expenses
Handle verifications and organize your receipts properly
Creating Verifications
A verification is the documentation that supports each bookkeeping entry. Every business transaction must have proper verification.
What Makes a Complete Verification?
Original Document
Invoice, receipt, bank statement, or contract
Verification Number
Sequential numbering for easy reference
Date
Transaction date and accounting period
Amount
Clear, accurate monetary value
Account Information
Which accounts are affected
Description
Clear explanation of the transaction
Document Retention and Digital Records
Modern Document Management
Current regulations allow for more flexible document management:
Organizing Documents in a Binder
Proper organization is essential for efficient bookkeeping and audit readiness.
Recommended Filing System
Chronological Order
File documents by date, creating a clear timeline of transactions
Sequential Numbering
Assign consecutive numbers to each verification (V001, V002, etc.)
Category Sections
Separate sections for: Sales invoices, Purchase invoices, Bank transactions, Cash receipts, Payroll documents
Types of Business Documents
Receipts
Proof of cash purchases
Invoices
Bills for goods or services
Bank Statements
Official record of account activity
Creating Your Own Verifications
Sometimes you need to create verifications for transactions that don't have external documentation.
When to Create Your Own Verifications:
Depreciation Entries
Monthly or annual depreciation of assets
Accruals
Recording expenses incurred but not yet billed
Adjusting Entries
End-of-period corrections and adjustments
Owner Transactions
Personal funds used for business or vice versa
Self-Created Verification Template
Chapter 3: First Income
Invoice routines and handling cash receipts
Setting Up Invoice Routines
Establishing proper invoicing procedures ensures timely payments and professional customer relationships.
Choose Your Invoicing Method
📄 Manual Invoicing
Create invoices using templates or simple documents.
Best For:
- Small volume businesses
- Simple services
- Getting started quickly
- Minimal initial costs
💻 Digital Invoicing
Use invoicing software or online platforms for automation.
Advantages:
- Automatic numbering
- Payment tracking
- Professional appearance
- Integration with accounting
Essential Invoice Elements
🏢 Business Information
- Your business name and address
- Phone, email, website
- Business registration number
- VAT number (if applicable)
📋 Invoice Details
- Invoice number (sequential)
- Invoice date
- Due date
- Payment terms
👥 Customer Information
- Customer name and address
- Purchase order number
- Contact person
💰 Line Items
- Description of goods/services
- Quantity and unit price
- Total amount
- Tax calculations
Handling Cash Receipts
Cash transactions require special attention to maintain proper records and security.
Cash Transaction Workflow
🧾 Issue Receipt
Always provide customers with receipts for cash transactions
- Pre-numbered receipt books
- Carbon copies for your records
- Include date, amount, and description
💰 Secure Storage
Keep cash secure throughout the day
- Use cash register or locked box
- Limit cash on hand
- Count regularly
🏦 Daily Deposit
Deposit cash daily to reduce risk and improve cash flow
- Count cash at end of day
- Prepare deposit slip
- Keep bank deposit receipts
📝 Record Transactions
Maintain detailed records of all cash transactions
- Daily cash register tape
- Receipt book copies
- Bank deposit confirmations
Value Added Tax (VAT) Considerations
Understanding VAT obligations is crucial for proper invoicing and tax compliance.
Do You Need VAT Registration?
📊 Below Threshold
Annual sales ≤ 120,000 SEK
Your Options:
- No VAT registration required
- Cannot charge VAT to customers
- Cannot reclaim VAT on purchases
- Voluntary registration possible
🏢 Above Threshold
Annual sales > 120,000 SEK
Requirements:
- VAT registration mandatory
- Must charge VAT on sales
- Can reclaim VAT on purchases
- Regular VAT returns required
VAT Calculation Example
💼 Service Invoice Example
💡 Tip: Always clearly show VAT separately on invoices when registered
💰 Tracking Customer Payments
Efficient payment tracking helps maintain healthy cash flow and customer relationships.
📊 Payment Tracking Dashboard
📋 Accounts Receivable
⏰ Aging Analysis
📞 Collections Pipeline
📅 Typical Customer Payment Timeline
Invoice Sent
Day 0: Invoice delivered to customer
Invoice Reviewed
Day 3-7: Customer processes invoice
Payment Approved
Day 15-20: Internal approval completed
Payment Sent
Day 25-30: Payment processed & sent
🎯 Collection Strategy Framework
Prevention Phase
Early Intervention
Active Collection
Resolution Phase
🔧 Essential Tracking Tools
📊 Basic Spreadsheet
💼 Accounting Software
🏢 Enterprise ERP
Chapter 4: Start Bookkeeping
Account invoices, chart of accounts, debit and credit
🔍 Swedish Chart of Accounts (BAS) Search
Search the official Swedish chart of accounts to find the right account codes for your transactions. BAS (Bokföringsnämndens allmänna råd) is the standardized accounting system used in Sweden.
Start typing to search accounts...
📊 BAS System Summary
The BAS (Bokföringsnämndens allmänna råd) provides a standardized framework for organizing all business accounts. This system ensures consistency, compliance, and proper financial reporting across Swedish businesses.
1000-1999
ASSETS (Tillgångar)
Everything the business owns or controls that has economic value
2000-2999
LIABILITIES & EQUITY (Skulder & Eget Kapital)
What the business owes and the owner's investment
3000-3999
REVENUE (Intäkter)
Income generated from business operations
4000-8999
EXPENSES (Kostnader)
Costs incurred in running the business
🎯 BAS System Benefits
🚀 Time to Start Recording Business Transactions
After the first month of basic tracking, it's time to transition to systematic bookkeeping. This chapter covers the foundation of double-entry accounting, setting up your chart of accounts, and mastering the debit-credit system that forms the backbone of all business financial records.
📋 Learning Objectives
- Understand the complete chart of accounts structure
- Master debit and credit rules for all account types
- Set up proper accounting systems and controls
- Learn to analyze transactions before recording
- Implement best practices for accuracy and compliance
📄 Legal Documentation Requirements
Before starting systematic bookkeeping, ensure you have proper documentation systems in place.
🧾 Source Documents
Sales Transactions:
- Customer invoices (numbered sequentially)
- Sales receipts and cash register tapes
- Credit notes and returns documentation
- Payment confirmations and bank deposits
Purchase Transactions:
- Supplier invoices and statements
- Purchase orders and delivery receipts
- Expense receipts and payment vouchers
- Bank statements and payment confirmations
📝 Record Retention
Journals, ledgers, trial balances, financial statements
Invoices, receipts, contracts, bank statements
Audited financial statements, tax returns
⚖️ Double-Entry Accounting System
Every transaction affects at least two accounts, and the total debits must always equal the total credits. This system ensures mathematical accuracy and complete recording of business activities.
🏛️ Fundamental Principles
- Dual Effect: Every transaction has at least two effects
- Balance: Total debits = Total credits
- Equation: Assets = Liabilities + Equity
- Completeness: All transactions must be recorded
- Accuracy: Mathematical precision is required
✅ System Benefits
- Automatic error detection through trial balance
- Complete audit trail for all transactions
- Systematic organization of financial data
- Reliable financial statement preparation
- Compliance with accounting standards
🎯 Mastering Debit and Credit Rules
📐 The Accounting Equation Foundation
This equation must always balance. When revenue increases equity and expenses decrease equity, we can expand this to:
📋 Complete Debit & Credit Rules
📈 DEBIT (Dr.) - Left Side
✅ INCREASES:
- Assets: Cash, inventory, equipment, receivables
- Expenses: All costs and expenses incurred
- Dividends/Drawings: Owner withdrawals
❌ DECREASES:
- Liabilities: Payables, loans, accruals
- Equity: Owner's capital, retained earnings
- Revenue: Sales, service income, other income
📉 CREDIT (Cr.) - Right Side
✅ INCREASES:
- Liabilities: Payables, loans, accruals
- Equity: Owner's capital, retained earnings
- Revenue: Sales, service income, other income
❌ DECREASES:
- Assets: Cash, inventory, equipment, receivables
- Expenses: All costs and expenses incurred
- Dividends/Drawings: Owner withdrawals
📊 Quick Reference Table
This table shows how debits and credits affect different account types:
Quick Reference:
↑ = Increases the account balance
↓ = Decreases the account balance
Remember: Every transaction must have equal debits and credits (double-entry bookkeeping)
📊 T-Account Structure
T-accounts provide a visual representation of how debits and credits affect different account types:
Cash (Asset)
Accounts Payable (Liability)
Sales Revenue
🔍 Transaction Analysis Framework
Before recording any transaction, follow this systematic approach to ensure accuracy and completeness.
📄 Identify Source Documents
- Verify document authenticity and completeness
- Check dates, amounts, and authorization
- Ensure proper sequential numbering
- Confirm VAT calculations if applicable
🎯 Determine Transaction Type
Revenue Transactions:
Sales, services, interest, rental income
Expense Transactions:
Purchases, wages, rent, utilities, supplies
Asset Transactions:
Equipment purchases, inventory, investments
Financing Transactions:
Loans, capital contributions, dividends
⚖️ Apply Accounting Equation
Ask these key questions:
- What increases? (Assets, expenses, or equity/revenue/liabilities?)
- What decreases? (Which accounts are reduced?)
- Does the equation balance? (Assets = Liabilities + Equity)
- Are amounts correct? (Including VAT calculations)
📝 Record the Entry
✅ Entry Requirements:
- Date transaction occurred
- Account names and numbers
- Debit and credit amounts
- Brief transaction description
- Reference to source document
- Total debits = Total credits
💼 Common Transaction Examples
Study these examples to understand how different business transactions are analyzed and recorded.
🛍️ Example 1: Credit Sale with VAT
Transaction: Sold products for $10,000 plus 20% VAT ($2,000) on credit to Customer ABC
Source Document: Sales Invoice #INV-2024-001
📊 Analysis:
- What increases? Accounts Receivable (Asset) by $12,000
- What increases? Sales Revenue by $10,000 and VAT Payable by $2,000
- Equation check: Assets ↑$12,000 = Liabilities ↑$2,000 + Revenue ↑$10,000
📋 Journal Entry:
| Date | Account | Ref | Debit | Credit |
|---|---|---|---|---|
| 2024-01-15 | 1910 Accounts Receivable | INV-001 | $12,000 | |
| 3000 Sales Revenue | $10,000 | |||
| 2610 VAT Payable | $2,000 |
Sale of products to Customer ABC, Invoice #INV-2024-001
💰 Example 2: Equipment Purchase with Financing
Transaction: Purchased office equipment for $15,000, paid $5,000 cash, financed $10,000
Source Documents: Purchase Invoice, Bank Statement, Loan Agreement
📊 Analysis:
- What increases? Office Equipment (Asset) by $15,000
- What decreases? Cash (Asset) by $5,000
- What increases? Notes Payable (Liability) by $10,000
- Equation check: Assets ↑$10,000 = Liabilities ↑$10,000
📋 Journal Entry:
| Date | Account | Ref | Debit | Credit |
|---|---|---|---|---|
| 2024-01-16 | 1250 Office Equipment | PO-155 | $15,000 | |
| 1930 Cash - Operating | $5,000 | |||
| 2410 Notes Payable | $10,000 |
Purchase of office equipment, partial cash payment with financing
🏦 Example 3: Collection of Accounts Receivable
Transaction: Received $12,000 payment from Customer ABC for outstanding invoice
Source Documents: Bank Deposit Slip, Customer Payment Advice
📊 Analysis:
- What increases? Cash (Asset) by $12,000
- What decreases? Accounts Receivable (Asset) by $12,000
- Equation check: Net change in Assets = $0 (one asset ↑, another ↓)
📋 Journal Entry:
| Date | Account | Ref | Debit | Credit |
|---|---|---|---|---|
| 2024-01-25 | 1930 Cash - Operating | DEP-078 | $12,000 | |
| 1910 Accounts Receivable | $12,000 |
Collection of payment from Customer ABC
Chapter 5: Record Everything
Common transactions, VAT handling, and error corrections
Common Business Transactions
📝 Sale on Credit
💰 Cash Purchase
💳 Payment Received
VAT Handling in Bookkeeping
📈 VAT on Sales (Output VAT)
VAT collected from customers - this is money you owe to the tax authority
- Account: VAT Payable (Liability)
- Credited when making sales
- Paid to tax authority periodically
📉 VAT on Purchases (Input VAT)
VAT paid on business purchases - this is money you can reclaim from the tax authority
- Account: VAT Receivable (Asset)
- Debited when making purchases
- Reclaimed from tax authority periodically
Correcting Errors
✏️ Simple Corrections
For minor errors discovered quickly:
- Draw a single line through the error
- Write the correction above
- Initial and date the correction
📝 Correcting Entries
For more significant errors:
- Create a new journal entry
- Reverse the incorrect entry
- Record the correct entry
- Include clear explanations
Chapter 6: Follow Up
Regular reporting, reconciliation, and monthly reviews
Monthly Reconciliation
1. Bank Reconciliation
Compare your bank account records with bank statements:
- Match deposits and withdrawals
- Identify outstanding checks
- Account for bank fees and interest
- Investigate any discrepancies
2. Accounts Receivable Review
Review customer accounts and outstanding invoices:
- Follow up on overdue accounts
- Update aging reports
- Consider bad debt provisions
- Review credit terms
3. Accounts Payable Review
Review supplier accounts and pending payments:
- Verify invoice accuracy
- Plan payment schedules
- Take advantage of early payment discounts
- Maintain good supplier relationships
Regular Financial Reports
📊 Income Statement (P&L)
Shows revenues, expenses, and profit for a specific period
🏦 Balance Sheet
Shows assets, liabilities, and equity at a specific date
Key Performance Indicators (KPIs)
💰 Gross Profit Margin
Measures profitability of core business operations
🔄 Current Ratio
Measures ability to pay short-term obligations
📈 Working Capital
Measures short-term financial health
⏱️ Days Sales Outstanding
Measures how quickly you collect payments
Chapter 8: After Year-End
Revision, company meetings, and regulatory compliance
Year-End Activities Overview
After completing your annual accounts or reports, there are several important activities to complete the financial year and prepare for the new one.
Annual Review and Revision
📋 Internal Review
Conduct a comprehensive internal assessment
Review Areas:
- Financial performance vs budget
- Cash flow patterns and trends
- Key performance indicators
- Operational efficiency metrics
🔍 External Audit/Review
Professional third-party verification if required
May Include:
- Independent audit (if required by law)
- Accountant review of financial statements
- Tax advisor consultation
- Compliance verification
Company Meetings and Governance
📅 Board Meeting
Board reviews and approves annual financial statements
- Review financial performance
- Approve annual accounts/reports
- Discuss dividend policy
- Plan for upcoming year
👥 Shareholder Meeting
Annual general meeting for shareholder approval
- Present annual results
- Approve financial statements
- Decide on profit distribution
- Elect board members
📋 Documentation
Formal documentation of decisions and approvals
- Meeting minutes and resolutions
- Signed financial statements
- Legal documentation updates
- Regulatory filing confirmations
Regulatory Compliance and Filing
Required Filings and Deadlines
🏛️ Tax Authorities
Submit required tax returns and payments:
- Corporate income tax return
- VAT final return for the year
- Payroll tax summaries
- Final tax payment calculations
🏢 Companies House
File annual returns and financial statements:
- Annual return with company details
- Filed accounts (full or abbreviated)
- Director and shareholder updates
- Confirmation statements
📊 Statistical Offices
Submit required statistical information:
- Annual business surveys
- Employment statistics
- Industry-specific reporting
- Economic data submissions
🔒 Record Retention
Ensure proper document storage and retention:
- Archive completed year's records
- Organize documents by retention requirements
- Update document management systems
- Secure sensitive information
Lessons Learned and Improvements
💡 Process Improvements
Identify areas where bookkeeping processes can be enhanced:
- Streamline transaction recording
- Improve month-end closing procedures
- Enhance reporting accuracy and timeliness
- Upgrade accounting software or tools
📈 Business Insights
Extract valuable insights from the year's financial data:
- Identify profitable product lines or services
- Analyze cost patterns and control opportunities
- Evaluate pricing strategies
- Assess cash flow management effectiveness
Chapter 9: New Budget
Follow-up analysis and planning for the coming year
Completing the Annual Cycle
With the previous year closed and analyzed, it's time to plan for success in the coming year. This chapter brings you full circle back to budgeting, but now with the valuable experience and data from operating your business.
Year-End Performance Analysis
Compare Actual vs Budget
🎯 Budget vs Actual Analysis
💡 Analysis: Revenue exceeded budget by 12.5%, indicating strong market demand or effective sales strategies.
Understanding Variances
📈 Favorable Variances
When actual results are better than budgeted
Examples:
- Higher than expected revenue
- Lower than budgeted costs
- Better profit margins
- Improved efficiency ratios
📉 Unfavorable Variances
When actual results fall short of budget
Examples:
- Lower than expected sales
- Higher than budgeted expenses
- Reduced profit margins
- Cash flow challenges
Planning the New Year Budget
📊 Review Historical Data
- Analyze 3-5 years of financial trends
- Identify seasonal patterns
- Understand growth trajectories
- Note any unusual one-time items
🎯 Set Strategic Goals
- Define growth objectives
- Plan new products or services
- Consider market expansion
- Set profitability targets
💰 Project Revenue
- Estimate sales volume growth
- Consider pricing changes
- Account for new revenue streams
- Factor in economic conditions
📋 Plan Expenses
- Review fixed vs variable costs
- Plan for inflation adjustments
- Budget for new investments
- Consider efficiency improvements
🏦 Cash Flow Planning
- Project monthly cash needs
- Plan for seasonal variations
- Arrange financing if needed
- Set cash reserves targets
Continuous Improvement Cycle
📋 Plan
Create detailed budgets and forecasts
🚀 Execute
Implement business operations
📊 Monitor
Track performance against plans
🔍 Analyze
Review results and identify improvements