The accounting ABC: from debet to egenkapital

The terms behind it, briefly explained

Finally a quick glossary of the terms from this article — brief and concrete, the way we explain them to our customers.

What is dobbelt bogholderi (double-entry bookkeeping)?

Dobbelt bogholderi is double-entry bookkeeping: every transaction is recorded twice — as a debit on one account and a credit on another. Debits and credits must always balance.

The principle makes errors visible: if debits and credits do not match, something was posted wrong. All modern bookkeeping systems apply double-entry automatically, so you rarely notice it day to day.

What is debet and kredit (debit & credit)?

Debit and credit are the two sides of every entry in double-entry bookkeeping: each transaction is posted with equal amounts on both sides, so the books always balance.

Rule of thumb: debit is where the value lands (the expense), credit is where it comes from (the bank). Modern systems handle this automatically behind the scenes.

What is a kontoplan (chart of accounts)?

The kontoplan is the list of accounts that all postings are sorted onto — e.g. sales, rent, software and the bank account. It's the basic structure of the books.

A good chart of accounts is adapted to your trade so the reports actually make sense. Your bookkeeper sets it up right from the start.

What is a postering (ledger entry)?

A postering is a single entry in the books: an amount posted to an account with a date, description and voucher number. Every transaction becomes one or more entries.

An entry always has a debit and a credit side that balance. Buy a computer, and the amount is posted as an expense (debit) and as a bank withdrawal (credit).

What is an efterpostering (adjusting entry)?

An efterpostering is an entry made after the day-to-day bookkeeping is done — typically at year-end, to correct errors or add missing items.

Classic adjusting entries are depreciation, accruals and inventory adjustments, added by the bookkeeper or auditor before the annual report is finalised. They are often kept in a separate journal so the changes are easy to trace.

What is a saldobalance (trial balance)?

A saldobalance is a list of every account in the books with its current balance. It is used to check that debits and credits match, and as the basis for the financial statements.

The trial balance is the bookkeeper's working document at year-end: every account is reviewed and reconciled before the numbers are assembled into the income statement and balance sheet.

What is a balance (balance sheet)?

The balance sheet shows the business's assets (what it owns) and liabilities plus equity (what it owes and what the owners have) at a point in time. The two sides are always equal.

Where the income statement shows the year's earnings, the balance sheet shows the financial position — the values, debt and savings.

What is aktiver (assets)?

Aktiver are everything the business owns of value: money in the bank, amounts owed by customers, inventory, equipment and vehicles.

Assets split into fixed assets (long-lived, e.g. machinery) and current assets (short-lived, e.g. bank balance and receivables).

What is passiver (liabilities & equity)?

Passiver are the financing of the business's assets: the equity plus all debt — e.g. supplier debt, VAT owed and bank loans.

The balance sheet balances precisely because liabilities always equal assets: everything the business owns is financed by either the owners or the creditors.

What is egenkapital (equity)?

Egenkapital is the owners' share of the business: assets minus debt. It grows with profits and shrinks with losses and dividends.

In an ApS the equity starts as the share capital (at least DKK 20,000). If equity turns negative, management must react — so keep an eye on it.

What is a resultatopgørelse (income statement)?

The income statement shows the business's income minus costs over a period — and thus whether there's a profit or a loss.

Together with the balance sheet it forms the core of the annual report. Day to day, you use it to see whether the business actually makes money.

What is omsætning (revenue)?

Omsætning is the business's total sales in a period, excluding VAT. Also called nettoomsætning or revenue.

Revenue is not profit: costs still have to come out. Several legal thresholds — e.g. VAT filing frequency and digital bookkeeping — depend on the size of your revenue.

What is likviditet (liquidity)?

Likviditet is the business's ability to pay its bills right now — in practice: how much money is available in the account.

A business can be profitable on paper and still run out of cash, e.g. if customers pay slowly. That's why the liquidity view matters as much as the result.

What is periodisering (accrual accounting)?

Periodisering means booking income and expenses in the period they relate to — not the period the money is paid. It gives a true picture of each period's result.

Pay a year of insurance in advance in November, and only two months should hit the old financial year; the rest is deferred to the new one. Typical accruals are prepayments, rent and subscriptions.

What is primo and ultimo (opening and closing balances)?

Primo and ultimo mean the start and the end of a period. The primo balance is an account's balance at the start of the financial year; ultimo is the balance at the end.

One year's ultimo figures become the next year's primo figures — for every balance sheet account. Profit-and-loss accounts are reset at year-end, so income and expenses start from zero.

What is a regnskabsår (financial year)?

A regnskabsår is the 12-month period a set of accounts covers. Most businesses follow the calendar year, but a shifted year (say 1 July to 30 June) is also allowed.

The first financial year may deviate from 12 months — up to 18 months for companies. The financial year drives the deadlines: an ApS must file its annual report no later than 6 months after year-end.

What is årsafslutning (year-end close)?

Årsafslutning is the work of closing the financial year: every account is reconciled, adjusting entries are made, and the numbers are prepared for the annual report and taxes.

Typical tasks are bank reconciliation, depreciation, accruals, stocktaking and reconciling VAT and payroll. Once the close is done, the annual report can be filed with the Business Authority and the tax return with the Tax Agency.

What is a mellemregningskonto (owner's current account)?

A mellemregningskonto is an account tracking running balances between the business and, say, its owner — out-of-pocket expenses and loans. It shows who owes whom.

Pay for something privately on the company's behalf, and the amount stands as the company's debt to you — repayable tax-free. Owe the company money instead, and it is an illegal shareholder loan, which gets taxed. Sole proprietors typically use the account for private drawings.