Finnish Company and Accounting Basics

Accounting is the systematic recording, processing, storing and summarizing of information about a company's business transactions in monetary terms. Accounting data provides information about the company's financial position, operating results and financial processes.

A company carries out business activities, purchases goods and services, produces and sells products or provides services. These activities result in income, expenses, assets, liabilities and other financial consequences that need to be recorded, monitored and analyzed.

The systematic processing and storage of financial information may be carried out by the company's accounting department or by an external accounting service. Their main task is to maintain the company's accounting records.

The main purpose and most important tasks of accounting are to:

• calculate the results of financial operations;
• determine which factors have contributed to these results;
• analyze the results obtained;
• provide information to management and other users of accounting information;
• monitor the company's financial position and financial processes.

In accounting, every business transaction is an event that changes the financial position of a company, and every such event must be recorded in the accounting books. Written supporting documentation is required for each business transaction, for example, an invoice, receipt, voucher, agreement or other document.

Business transactions must be recorded in the accounts continuously and systematically as they occur. This provides information about the company's financial result, including the amount of profit or loss generated by its activities. In addition, accounting is used to monitor the cash available for making payments, as well as receivables and payables arising from business operations. Accounting information also makes it possible to assess the company's assets, liabilities and equity. Corporate taxes are determined on the basis of information provided by accounting.

Accounting is the continuous processing of information expressed in monetary terms to determine the financial result, assess the company's financial position and plan its future activities.

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

Each stakeholder group provides something to the company and receives something from the company in return. Raw materials and supplies are purchased from suppliers, goods and services are sold to customers, capital is received from owners and lenders, and labor is provided by employees. All business transactions between stakeholders are measured in monetary terms and result in financial consequences and payments. The purpose of accounting is to describe and record different types of company expenses, income, assets, liabilities and sources of funds.

Accounting legislation establishes bookkeeping obligations for certain entities. Accounting records must be maintained in accordance with the established requirements in order to provide information about the company's activities to its primary users. The primary users of accounting information can be divided into two groups: internal and external users.

• Internal users of accounting information include owners, management and employees.
• External users of accounting information may include investors, creditors, suppliers, customers, tax authorities, regulatory authorities and auditors.

The obligation of a legal person to keep accounting records is determined in Chapter 1, Section 1 (§ 1) of the Finnish Accounting Act (Kirjanpitolaki 1336/1997). The Accounting Act establishes the obligation to keep accounting records for the entities covered by the Act.

Accounting enables management to assess the financial result, monitor assets and liabilities, analyze income and expenses, and make decisions about the company's future activities.

In the following materials, we will examine the main elements of accounting step by step: business transactions, accounting accounts, double-entry bookkeeping, debit and credit, and the accounting rules for assets, liabilities, income and expenses.

Remember that accounting is your money and your responsibility! Learn the basics of accounting in Finland through simple steps and practical tips.