Introduction to bookkeeping
What exactly is bookkeeping, and why do you have to do it? Bookkeeping is largely about documenting a company’s business events in a structured way. This is to form a basis for taxation, as well as for the company itself to be able to analyze reports in order to be able to make decisions about its operations. An important part of this is that the accounting must be able to be understood and reviewed by an outsider, and that is what the Accounting Act sets up a framework for. For example, there must be written evidence, so-called verifications, for all business events, and the accounting records must be archived in order to be audited afterwards.
What is debit and credit?
These terms are simply the accounting geeks’ way of saying plus and minus. However, what plus and minus mean is not always logical to outsiders. Debit increases a cost, but at the same time reduces a debt. If you pay SEK 1,000 for advertising, the accounting account for your bank account is credited with SEK 1,000, and the advertising expense account is debited with SEK 1,000. If you receive a payment for an accounts receivable of SEK 5,000, the bank account is debited with SEK 5,000, and the accounting account for accounts receivable is reduced by the same amount.
Learn more about this in our article about laws and regulations that apply to accounting.