What is accounting – in brief
Accounting is an information system that maintains information on the financial activity and status of an enterprise or entity at the level of individual transactions. Accounting also refers to the recording of transactions in the accounts and other related activities. An important part of the accounting system is the ledger, or register, which keeps track of accounts payable and receivable and their settlement. Accounting transactions are recorded by means of vouchers. A voucher can be an invoice, contract or other activity that verifies the basis and nature of the transaction. Vouchers should be processed electronically. This makes it easy to find the information contained in them, saving time, effort and archive space. The accounts produce statutory and non-statutory reports for the needs of the company or entity and its stakeholders. One of the important functions of accounting is to keep private and corporate assets separate. Attention must also be paid to formalities and other legal requirements in relation to the supporting documents to be attached to company accounts. The general objective is to obtain a true and fair view of the profitability of the business.
Developments in accounting
The basic accounting system was developed a long time ago The general principle is to separate the assets (debit) and liabilities (credit) of a company. The profit or loss for the period is monitored in the profit and loss account, while the balance sheet includes items that are allocated over a longer period. A key balance sheet indicator is the company’s equity, which includes shareholders’ equity, other fund investments and, according to certain rules, subordinated loans. From the point of view of the company, these items are debt (credit), i.e. they have been provided by the owners to start up the company. Other debts of the enterprise consist, for example, of loans from banks and other financial backers or, for example, purchase debts from suppliers. The assets of the enterprise (debet) consist of various tangible or intangible items, such as fixed assets (e.g. production machinery and equipment) or inventories (stocks, etc.). The enterprise pays income tax on its profit for the accounting period. If the company’s business is taxable under the VAT Act, the company also includes VAT when invoicing. Similarly, the company is allowed to deduct VAT on purchases made in respect of the activity in question. The net tax is either paid or claimed back from the tax authorities through the self-assessment service. We can help you get started right from the start.
By law, a company must keep records of its activities and file them for the periods required by law. Supporting documents must be kept for the current year + 6 years backwards. Balance sheets should be kept for 10 years backwards.
What should I do if I lose my voucher?
Chapter 2, Section 5 of the Accounting Act states that if the entry is not supported by a document issued by a third party, the entry shall be verified by means of a duly certified voucher drawn up by the accounting officer himself.
How do I bill the company for expenses I have paid myself?
By drawing up an invoice (travel or expense invoice) to charge the company for the expenses. As the biller, the payer – it is a good idea to attach the original purchase receipt. We always recommend using electronic financial management software to process receipts and vouchers. It saves time, effort and money!
Financial statements
The financial statements are a summary statement of a company’s financial year, which shows the company’s results and financial position at the balance sheet date. The objective is to allocate the expenses to the profit and loss account in order to achieve the most accurate result for the financial year. The company must prepare financial statements at least once a year. In addition, a company may, if it so wishes, draw up interim accounts more frequently (e.g. quarterly or otherwise) in order to ascertain its current position.
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Electronic identification
For electronic authorisation, the suomi.fi authorisation is used.
Suomi.fi authorisations allow you to authorise another person or company to act on your behalf in matters of your choice. You can also request an authorisation to act on behalf of another person or company and manage your authorisation centrally.
Suomi.fi authorisations are secure because the user is identified by strong authentication. For more information on authentication, see the About authentication page.
In 2019, the suomi.fi authentication will replace the previously used see ID.
Cash forecast
An up-to-date cash forecast aims to ensure that the company’s incoming cash flows cover all its costs and other expenses. This allows the company to anticipate and avoid an acute cash shortfall. In the long term, the cash position of a company tracks the profitability of the company, but it is easy to distinguish between, for example, large investments and strong growth. Even a profitable company can quickly run into cash flow problems and, in the worst case, go out of business. Monitoring the cash flow of a company is therefore one of the most important areas of business monitoring. The old adage “profits come and go but cash is the king” holds true for the success of a business.
Audit
An audit is an examination of the accounts and operations by an external auditor. The auditor must hold the necessary KHT or HMT qualifications. A company or foundation must appoint an auditor and have an audit carried out if at least two of the following conditions have been met in the financial year that has just ended and in the financial year immediately preceding it:
1) the balance sheet total exceeds EUR 100 000
2) the turnover or equivalent income exceeds EUR 200 000
3) the average number of employees exceeds three.
However, an entity must always be audited if its principal activity is the ownership and management of securities and if it has significant influence over the business or financial affairs of another reporting entity. Where appropriate, an entity or foundation may also decide to have an audit carried out even if there is no legal obligation to do so. We can help you find an auditor if you need one.
Hiring and paying an employee
As a business grows, the situation arises that more resources are needed. Through effective subcontracting, a company can build a functional and efficient entity, but the need to hire in-house staff may also arise. When considering hiring a person, it is definitely worth discussing with a competent accounting firm. It is easy for even the most experienced entrepreneur to get confused with employment contracts, payroll, job expenses and various legal obligations. The main issues to be dealt with are: statutory insurances such as accident and group life insurance, occupational pension insurance (tyel) and statutory contributions to the unemployment insurance fund. As far as employment is concerned, it is important to ensure, among other things, that working hours are monitored and, of course, that regular salary payments are made directly into the employee’s bank account in accordance with the employment contract. The employment contract can also be concluded orally, but this is not recommended in order to avoid any ambiguity later on about what was agreed. We can help you get started quickly and safely, so when you are considering hiring a worker, please contact us.
