What are annual accounts, and why do they matter?
What are annual accounts, and why do they matter?
Annual accounts are a report that shows how your company's finances have developed over a financial year. They give a detailed overview of your company's financial position by showing income, expenses, assets and liabilities. Correct annual accounts matter because they help create transparency, ensure legal compliance and make sure all financial information is documented.
Annual accounts are used by business owners, investors and authorities alike to assess how the company is performing financially. For investors, they give a clear picture of the company's profitability and stability, while for the authorities they are a tool for checking whether the company complies with accounting legislation.
Who must prepare annual accounts?
In Denmark, most company forms are legally required to prepare annual accounts. The following types of business are obliged to do so:
- Private limited companies (ApS) and public limited companies (A/S): Must submit annual accounts to the Danish Business Authority (Erhvervsstyrelsen) every year.
- Entrepreneurial companies (IVS): Although this company form has been phased out, the obligation applies to existing IVS companies.
- Other limited liability companies: Must also file.
Sole proprietorships and small personally owned businesses (PMV) are normally not required to submit annual accounts, but it is still advisable to prepare internal accounts for a better financial overview.
Find out here whether your annual accounts need to be audited
What must annual accounts contain?
Annual accounts must meet certain legal requirements and contain specific elements:
- Income statement: Shows the company's income and expenses and calculates the profit or loss for the year.
- Balance sheet: Shows the company's assets (what the company owns) and liabilities (what the company owes).
- Notes: Additional explanations of items in the income statement and balance sheet, such as how assets and liabilities have been measured.
- Management's statement: A statement from the company's management confirming that the accounts are correct and prepared in accordance with current legislation.
- Auditor's report: If the company is subject to audit, an independent auditor must review and approve the accounts.
When must the annual accounts be submitted?
The deadline for submitting the annual accounts depends on the company's financial year. Most companies have a financial year that follows the calendar year, which means the annual accounts must be submitted by 31 May of the year after the financial year ends.
It is important to meet the deadline, as late submission can result in fines and sanctions from the Danish Business Authority.
Why do annual accounts matter?
Annual accounts serve several important functions:
- Legal requirement: Companies are required to submit annual accounts to the authorities.
- Financial overview: They give an accurate picture of how the company is performing financially.
- Basis for decision-making: Owners and management can make better decisions based on financial data.
- Transparency: Investors and lenders can assess the company's financial health.
- Tax calculation: The accounts are used to calculate the company's taxable income.
How to prepare annual accounts
Preparing annual accounts can seem complicated, but the process can be simplified by following these steps:
- Bookkeeping throughout the year: Record all income and expenses on an ongoing basis.
- Reconcile accounts: Check that all entries match your bank statements.
- Prepare the income statement: Calculate the company's total income and expenses.
- Prepare the balance sheet: Determine assets and liabilities.
- Add notes: Explain and document significant items.
- Review the accounts: Make sure everything is correct and compliant.
- Have the accounts audited (if required): An auditor can help ensure accuracy and legal compliance.
Get help with your annual accounts at Summ
Preparing correct annual accounts can be time-consuming and complex. At Summ, we offer professional help with annual accounts: read more here.
Our services include:
- Preparing and submitting annual accounts
- Ongoing bookkeeping and financial advice
- Help with complying with accounting legislation
Contact Summ today for a no-obligation conversation about how we can help you get your annual accounts in order, simply and professionally.
