Finnish Company and Accounting Basics

Any company needs the money to carry out its economic activities properly. The essence of the work of the enterprise lies in the fact that it provides customers with goods or services and by selling them it receives income. Thus, the main aim of the company creation and the basis of its operations is to generate income. In order to generate income, the company invests certain funds in its activities, i.e. incurs various costs: wage payments to employees, raw materials purchase, payment of taxes etc. All these operations have financial implications need to be taken into account, considered, monitored and evaluated.

The systematic process of recording, processing, storing and summarizing financial information is handled by the company's accounting department or outsourced accounting department / firm, the primary function of which is to maintain accounting.

The main aim and the most important tasks of accounting is to:

• calculate the result of finance operations;
• find out which factors have formed this result;
• analyze drawn results;
• provide obtained information for the management,
• and as a result, provide overall control over company financial processes.

In accounting, every business transaction is an event that changes the financial position of a business, and any such event must be recorded in the books of accounts. The written proof is required for every business transaction, it can be, for example, an invoice, receipt, voucher, agreement etc.

Business transactions have to be recorded in the accounts on a continuous and systematic basis as soon as they occur. Hereby, you will get an idea of the received financial result: how much profit or loss was generated by your business. In addition to this, accounting is used to monitor the amount of money available for making payments, as well as receivables and payables arising from operations. Corporate taxes are determined on the basis of information provided by the accounting.

Accounting is the continuous processing of information expressed in money to determine the financial result and to plan company's future actions.

Every company is constantly dealing with other entities and economic units. Owners, shareholders, employees, suppliers, customers, competitors, business partners and other organizations, banks and different financial institutions, civil society and public authorities form the environment in which a company operates. They are called company stakeholders.

Each of the stakeholder groups provides something to the company, as well as gets something from the company. The raw materials and supplies are purchased from suppliers, goods and services are sold to customers, capital is received from owners and lenders, and labor inputs are received from employees. All business operations between stakeholders are measured in terms of money, and as a result of these business transactions payments arise. The purpose of accounting is to describe and record all types of company’s spending and money sources.

Accounting legislation and tax legislation impose bookkeeping obligations in certain cases. Accounting is necessary to be kept in the established order in order to provide information of the company's activities to the primary users. There are two type of the primary users: internal and external users.

• Internal users of accounting information are owners, management and employees.
• External users of accounting information can be investors, creditors, suppliers, customers, tax authorities, regulatory authorities or auditors.

Obligation of a legal person to keep accounting records is determined in the Chapter 1, Section 1 of the Finnish Accounting Act 1336/ 1997 in English and in Finnish. A general partnership, a limited partnership, a limited liability company, a co-operative, an association, a foundation, another legal person under private law, and a registered religious community - the all these entities have an obligation to keep accounting records!

Remember, that accounting is your money and your responsibility! Learn the basics of bookkeeping in Finland in easy to follow steps and tips.