Bookkeeping for beginners: debit, credit and the journal

Debit and credit

Double-entry bookkeeping means every entry is written on two accounts with the same amount: one is debited, one credited. All debits therefore always equal all credits, which is what makes the balance sheet balance. Debit and credit are not "good" and "bad"; they are the two sides.

The rule of thumb: assets and costs increase in debit, liabilities, equity and income in credit. Buy a computer for 8,000 kr. from the bank and you debit IT equipment (an asset or cost increases) and credit the bank (an asset decreases). Send an invoice for 10,000 kr. and you debit Debtors (the customer owes you) and credit Sales (income increases).

In Veneti you do not write debit and credit yourself. A journal line has an Account and an Offset account, and a positive amount debits the account and credits the offset account. A negative amount turns it around. The VAT is worked out from the VAT code and lands on the VAT accounts by itself.

The voucher

A voucher is the documentation for an entry: the invoice, the receipt, the bank statement or the note that explains why the money moved. Every entry must lead back to its voucher, and every voucher forward to its entry. That is why every booked voucher gets a voucher number that is never changed or reused.

In Veneti the voucher and the entry are one: the journal line has a File column where the document sits, and the voucher number stands first. Receipts you send to the company's own inbox or upload attach themselves to the bank line they belong to. What the law requires of a voucher, and how long it must be kept, is in the guide Vouchers and the Danish Bookkeeping Act.

The journal

The journal, the kasseklade, is where everything lands before it is booked: bank lines from the daily import, supplier invoices from email or as e-invoices, customer invoices you create, and general journal vouchers you type. It is a draft: everything can be changed while it sits there. Every line has:

• Voucher number, date and type: general journal voucher, customer invoice, supplier invoice or a line from the bank.
• Account and Offset account: the two sides of the entry.
• VAT: the VAT code, which decides how much VAT is calculated and where it counts in the VAT return.
• Amount and currency: the amount in the voucher's own currency; the rate is the Danish central bank's.
• Description and File: the text you can search for later, and the voucher.

For a bank line, Veneti suggests the account and VAT code from your chart of accounts and what you have booked before, and the reasoning stands beside the line. When there is doubt, you get the suggestions to choose between. How the bank comes in is under Banking and coding.

Booking locks. Mistakes are corrected with a reversal.

When you press Book, the voucher moves from the journal to the booked entries, where it can no longer be changed. That is not a limitation of the application but the ground rule of bookkeeping: accounts whose past can be rewritten can be trusted by no one. Before booking, the voucher is checked: date, amount, account and offset account must be there, it must balance, and the period must be open.

A mistake in a booked voucher is corrected with a reversal, a storno: a new voucher with the same entries and the opposite sign, so the two cancel, and then the correct voucher. Both remain, each pointing at the other. A bank line is not reversed, because the bank's movement happened; a wrong coding on it is corrected with a general journal voucher that moves the amount to the right account.

The reports

The reports are the books seen from above. The income statement shows a period's income and costs, and at the bottom the result. The balance sheet shows assets, equity and liabilities on a date, with opening and closing balances. Cash flows show where the money came from and went, Sales shows revenue per customer and product, Debtors and Creditors show who owes whom, and VAT shows the return for a period.

In Veneti the reports show the journal's vouchers beside what is booked, so a month can be reviewed before it is booked, and every figure opens to the entries it is made of. That is how you find mistakes: not by reading totals, but by opening them. The reports are described under Reporting.

Your first voucher

1. 1

   Create the company

   Find the company by name or CVR number. The chart of accounts and the VAT codes are set up from the start, so you can book right away. Get started.

2. 2

   Connect the bank

   Sign in with MitID to your online bank and choose the account and the start date. Transactions arrive every day as lines in the journal.

3. 3

   Code a bank line

   Open the journal. Veneti has suggested an account and VAT code on every line; read the reasoning and correct it if you disagree. Attach the receipt if it is not already there.

4. 4

   Type a general journal voucher

   Press Finansbilag and fill in date, amount, account, offset account and description. A positive amount debits the account and credits the offset account.

5. 5

   Book

   Select the lines and press Book. The vouchers move to Booked entries, and the income statement and balance sheet update at once.

6. 6

   Read the report

   Open the income statement for the month and click a figure. If you can follow it down to the voucher, the bookkeeping is in order.

The next step is to understand the chart of accounts, so you know where things belong: The chart of accounts.

Questions