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This guide to accounting provides you with a simple introduction to the most important areas
of accounting. It is not our intention to provide comprehensive documentation. Our aim is to
help you get started.
Keeping accounts is not just an obligation; thoroughly prepared accounts are the best tool
available to you in the management of your enterprise.
Particularly to start with, you should spend some time on establishing good accounting procedures
and systems:
1. Enter account codes (see Standard Accounts Chart) on vouchers, also called posting. This
involves assigning an account to each voucher to be entered in the books.
2. Decide how purchases are to be dealt with as regards VAT, considering that the rates differ.
Input VAT is only deductible when documented by a voucher.
3. Decide whether an expense allowance is subject to a reporting duty, payroll withholding tax,
and employer's National Insurance contribution. Expense allowances are benefits that
employees receive to cover costs incurred in connection with the performance of their work.
4. Decide whether major purchases of machinery and other fixtures and fittings should be
capitalised or expensed. As a rule, tangible assets should be capitalised in full (entered in the
balance sheet) at the time of purchase. Insignificant procurements can be charged to income
directly. In an accounting context, there is no exact limit for capitalisation while, in the tax
context, there will be clear criteria to consider.
5. Register accounting information in an accounting system. Accounting information is usually
registered in the accounting system using specially developed accounting software that has to
be bought. Although it is legal to keep accounts using pen and paper, in most cases, it is
hardly expedient or efficient. As a rule, you may not keep accounts using spreadsheets. Those
who have a bookkeeping obligation and less than 600 vouchers per year may nevertheless do
so. In this context, a 'voucher' means documentation of a single transaction with another party,
for example a purchase, sale or payment. A paper copy of the spreadsheet must be printed
out by given deadlines, dated, signed and filed (the accounts are deemed to be manually kept
accounts on paper). See the Norwegian Bookkeeping Standards Board's statement
concerning spreadsheets. GBS 14 – Bookkeeping by use of spreadsheets discusses this (in
Norwegian only).
6. Prepare accrued income statements and balance sheets, usually every other month. This is
also called accruals accounting. To accrue means to assign income and expenses to the
correct period.
7. Specify purchases/sales according to which party they are purchased from / sold to (keep
subsidiary ledgers). A subsidiary ledger (purchases/sales ledger with customer/supplier
specification) is a current account between a customer and a supplier or vice versa. When an
invoice is received, it must be entered in the accounts on the invoice date. It is debited to a
cost centre and credited to the purchases ledger for the relevant supplier. When the invoice is
paid, the payment is credited to a bank account and debited the purchases ledger.
8. Reconcile bank accounts, cash and taxes/public charges. All balance-sheet accounts must be
documented. In practice, this means that all balance-sheet accounts in the general ledger
must be reconciled.
9. Reconcile sales and purchases ledgers by obtaining bank statements and comparing the
amounts to the enterprise's corresponding accounts.
10. Prepare documents that you are legally obliged to submit to the tax collector, the tax office
and the Brønnøysund Register Centre, such as payment record forms, income statements, tax
returns, VAT returns and annual accounts.
Note that information about the forms you are obliged to submit is available on the website of
Brønnøysund's Register of Reporting Obligations of Enterprises. Here, everyone can look up 'their
obligations':
When choosing an accountant, you should preferably find a partner with whom you can also discuss
how to resolve any problems that you encounter from day to day. Approach several accounting firms
and seek advice from your banking partner, auditor and other businesspersons.
The Norwegian Bookkeeper Act helps to provide those who buy accounting services with a better
product. All accountancy firms must have at least one certified accountant with a certain educational
background and length of service within the profession. The Financial Supervisory Authority of
Norway's spot checks have shown that the quality varies widely from one firm to the next.
The accountant is obliged to establish a written assignment agreement describing the tasks to be
carried out by the accountant and the tasks that you must carry out yourself, and what reports you will
get and when.
Open a separate bank account for the enterprise. Pay all business expenses using the enterprise's
funds.
Let an accounting professional (your accountancy firm or auditor) help you decide on the most suitable
accounting software in your case. It may also be smart to choose a system that others have
competence in, so that you do not find yourself completely alone in the world when things go wrong
after you have made hundreds of entries. You must also make sure that the system is capable of
generating all statutory reports.
More information about this topic can be found in: (In Norwegian only)
The Norwegian Tax Administration's brochure: Office work and accounting
Before the accounts are closed for statutory financial reporting (submission of VAT return or similar),
book entries can be changed directly in the accounting system without further documentation.
Once the reports have been generated and the accounts for the period closed, it must not be possible
to change the recorded information.
Any correction of incorrectly recorded vouchers must then be in the form of a new entry. The original
posting must then be reversed as a whole. The correction voucher should refer to the voucher number
that is being corrected and state the reason for the correction.
When a posting is deleted, for example due to double-posting of an incoming invoice, it must always
be specified in the books or on the voucher that such deletion has taken place.
Reports
The Norwegian Bookkeeping Act specifies what reports must be prepared as a minimum:
An income statement and balance sheet shall be prepared for each reporting period.
You do not have to print the reports/ income statement / balance sheet, provided that the complete
reports have been generated and are stored electronically in your accounting system.
Some additional requirements apply to certain trades and industries, for example hotels and food-
serving establishments, hairdressers and taxi drivers.
Some documents only have to be stored for 3 1/2 years. They are:
- Agreements of importance to the enterprise
- Correspondence containing material additional information to that entered in the books
- Outgoing packing notes etc. existing in hardcopy at the time of delivery
- Price lists required by law/regulations
Accounting material shall be stored in an orderly manner and be adequately secured against
destruction and theft. Throughout the storage period, it must be possible to present the accounting
material to public supervisory authorities in a form that enables it to be reviewed.
This shows an incoming invoice for office supplies entitling to a deduction for input VAT. The invoice
amount inclusive of VAT is NOK 1,500. When this is registered to account 6800 using VAT code 1, the
system will make the following postings:
Account 6800 office supplies, debit NOK 1,200
Account 2710 input VAT, debit NOK 300
Account 2400 trade creditors, credit NOK 1,500
When you have booked all vouchers for the period, you can generate a VAT return from the
accounting system.
1. Miscellaneous vouchers
2. Bank
3. Cash – ordered by date
4. Incoming invoices
5. Outgoing invoices – ordered by number
The oldest vouchers are at the back under each divider. The newest vouchers are at the top of the
pile. The accountant will always start at the back of the binder and work his/her way forward
numbering the vouchers consecutively.
If you have many bank vouchers, you should separate incoming and outgoing payments. If your
enterprise uses several bank accounts, they should be sorted separately.
Set aside sufficient time to look through incoming mail every day. Check immediately that incoming
invoices tally with the packing notes received. Is the quantity on the invoice the same as the quantity
received and of the requisite quality?
If the invoice is correct, you can sign to confirm it and place it directly in the voucher binder. If you use
internet banking, you can schedule payment on the due date.
Remember that the invoice must be included even if it is not paid by the end of the period.
Whether a voucher belongs to the period or not depends on its date (the 'voucher date'). If you in any
one month receive an invoice for goods or services delivered in the previous month, a copy of that
invoice shall be placed in the voucher binder and marked with 'copy – to be accrued'.
If you receive an invoice for deliveries to be made in the following period, it shall be entered in the
books as a pre-paid expense. The expenses are incurred on the date when the delivery
takes place. Only the net amount is accrued; VAT follows the invoice date.
The accounts are based on a standard. Roughly speaking, the accounts consist of two parts:
the profit/loss account and the balance sheet.
The profit/loss is the enterprise's actual profit or loss for the period. If rent is paid per quarter, only
rental payments for the relevant accounting period should be expensed. Other rental payments should
be entered as pre-paid rent. The accounts have been accrued when they show actual income and
expenses for the period.
Depreciation
Insurance
Interest
Holiday pay
Employer's National Insurance contributions
Accrued, not invoiced revenues
Changes in stocks of goods
The enterprise increases its solidity and builds up a buffer, so that it is better able to take a loss in
future. Make sure that you retain some of the profit until the enterprise's equity corresponds to
between 20 and 25% of its assets.
If you are operating a sole proprietorship, the profit must also cover the owner's 'salary', i.e. private
withdrawals and taxes.
When tangible assets are acquired, they must be entered in the balance sheet and the asset must be
depreciated (expensed) over time. There is a big difference between depreciation for accounting
purposes and depreciation for tax purposes. Enterprises that only have a bookkeeping obligation or
that have a limited accounting obligation need only observe the tax-related depreciation rules.
Tangible fixed assets and significant operating assets that decrease in value due to wear and tear etc.
are depreciated for tax purposes using the reducing balance method of depreciation. An operating
asset is deemed to be a tangible fixed asset when it is expected to have a service life of at least three
years from the date of acquisition. An operating asset is deemed to be significant when the cost price
is equal to or exceeds NOK 15,000 (excl. of VAT).
The balance sheet says a lot about the enterprise's 'health condition'. An experienced reader of
accounts will form an impression of financing, stock-keeping, investments, credit periods and liquidity.
As a rule, all investments should be based on long-term financing. This means that equity plus long-
term liabilities should be at least equal to fixed book assets.
You should also ensure 20-25% equity financing. Equity financing improves the enterprise's ability to
cope with a recession.
Limited companies are required by law to have 'adequate' equity. Board members are personally liable
if the board fails to act correctly when more than half the enterprise's equity is lost.
At the start of a new accounting year, the balance of the balance-sheet accounts will be transferred,
while the profit/loss accounts are reset to zero. The difference between income and expenses
(profit/loss for the year) is the only item that is transferred from the profit/loss account. The profit/loss
is added/deducted from the balance-sheet equity. Equity at the end of the period is thus equal to
equity at the start of the period +/- profit/loss for the period.
In connection with investments, it may be useful to be acquainted with some of the most important
depreciation rates:
1. Performance requirements
Review the accounts, one by one. Use a spreadsheet. The following setup may be useful for preparing
a rough budget:
When you have reviewed all income and expenses, you start on the second phase of the budget work.
Will the profit/loss satisfy your own and the owners' goals?
In a limited company, the owners will probably require a return in the form of dividends. You will
probably have to review your plans again in order to identify possible cost cuts, changes and
opportunities for increasing income.
When you have a budget that provides a satisfactory profit/loss, you are ready to proceed to the next
step:
What will be your income and expenses each month? Take account of seasonal variations and
estimate revenues and cost of goods each month. Do seasonal variations affect payroll expenses?
3. Liquidity budget
If you are about to make investments, take up new loans or have poor liquidity, you will need a liquidity
budget. A liquidity budget simulates loan instalments, credit periods, tax payments etc. A spreadsheet
may have certain shortcomings when many parameters have to be taken into account. It may be a
good idea to request the help of your accountancy firm in preparing the liquidity budget.
5. Budget simulation
A thoroughly prepared liquidity budget is also a good basis for assessing the effects of new
investments and new financing.
The budget allows you to play with various business scenarios on paper. What if there is a 1%
increase in the gross profit? What if the credit period is reduced by ten days? What if we repay the
overdraft and take out a long-term mortgage loan? These are fun, interesting and very important
exercises that you can do alone or together with your accountancy firm or auditor. You will be
surprised how great the effects can be of seemingly small and simple measures. An experienced
budget user can provide you with much input so that you can increase the enterprise's profitability and
have more financial leeway.
6. Monitoring performance
The final step in the budget process is to check actual accounting figures in relation to the budget.
Most accountancy software will be able to present accounting figures and comparable budget figures
in a single report.
When you check actual income and expenses in relation to the budget, you will see whether the
performance of your enterprise is good or poor in relation to the goals you set yourself.
You will be able to identify budget variances at an early stage. Some variances are acceptable. If you
have a problem with your earnings, any budget variance will require a correction of the course. You
should correct your course while you still have momentum! Perhaps you need to return to phase one
in the budget process in order to review the plans?
VAT returns
Anyone operating an enterprise that is liable to VAT must submit a VAT return every other month (for
each period).
Enterprises with sales liable to VAT of less than NOK 1 million exclusive of VAT can apply to the tax
office to submit annual VAT returns.
The VAT return shall be submitted even if the enterprise has been without activity. The accounts must
not be changed once the VAT return has been submitted (the period must be locked for editing). If you
fail to submit a VAT return, the tax office will stipulate an amount that you will subsequently be
required to pay. If you then submit a VAT return, the tax office will disregard the stipulated amount.
You must always be ready to pay an additional charge of 3% of output VAT, however.
The tax office calculates interest on overdue payment. Public agencies are quick to contact the
Enforcement and Execution Commissioner in order to collect their claims. If you are smart, you will
submit the VAT return and pay outstanding VAT in time.
You can submit the VAT return electronically via Altinn. On electronic submission, you will be notified
immediately of any accounting errors or missing information in your VAT return. The deadlines are the
same as for submission on paper, however.
You can read more about VAT in 'Value Added Tax – Guidelines for businesses'
Annual accounts
All private and public limited companies, foundations, housing associations, housing cooperatives etc.
that are under an obligation to submit annual accounts pursuant to the Norwegian Accounting Act
Section 1-2 must submit their annual accounts.
No later than one month after adoption of the annual accounts, those who are obliged to submit
accounts shall send a copy of the annual accounts, the annual report and notes to the Register of
Company Accounts in Brønnøysund. Those who are subject to an auditing obligation must also submit
the auditor's report.
The reporting obligation applies from the date on which the enterprise is established, including to
enterprises that are being wound up, until the date of deletion from the Register of Business
Enterprises. The obligation exists even if the enterprise has not had any activity.
If the annual accounts are not submitted to the Register of Company Accounts by 1 August (or 1
September via Altinn), the enterprise will be subject to a penalty charge. The penalty charge increases
every week and can reach a total of around NOK 45,000. Members of the board are jointly and
severally liable for payment. In practice, a remission of this charge is very difficult to obtain.
Tax returns
You will find your pre-completed tax return and all relevant attachment forms in your message box in
Altinn.
Self-employed persons using Income Statement 1 (RF-1175) can get help in Altinn to fill in the
necessary attachment forms and transfer values between the forms.
You will find support in control and help functions during the filling-in process.
Your tax return is stored for ten years in your own electronic archive at www.altinn.no.
If you submit your tax return electronically, the tax settlement notice will also be sent to you
electronically.
Self-employed persons etc. who wish to submit their tax return before 1 April can do so from mid-
February using an annual accounts program (without obtaining preliminary information).
You can read more about tax deducted and employer's National Insurance contributions in Chapter 8
'Payroll procedures'
If you are supplying goods or services on credit, you should issue the invoice as soon as
possible after delivery. It is important that the money comes in quickly.
As a result of poor invoicing procedures, some people actually forget to invoice deliveries. In other
instances, invoices are so poorly filled in that they provide a basis for the tax authorities to increase
the issuer's income by discretionary assessment.
Date of issue
Computer-generated or pre-printed number
The seller's name and organisation number, followed by the letters MVA if the enterprise
is registered in the VAT Register
The buyer's name, address or organisation number (some exemptions exist for cash
sales)
A clear description of the goods or service
Nature and scope of the goods/service provided
Price of the goods or service and due date for payment.
Time and place of delivery
If applicable, VAT and other taxes
For limited companies, public limited companies and branches of foreign enterprises the word
‘Foretaksregisteret’ must be stated on all sales documents
Sales liable and not liable to VAT and sales that do not fall under the scope of the Norwegian VAT Act
shall be stated and added up separately. The same applies to sales that are subject to different VAT
rates.
Invoices must be issued in at least two copies, one of which shall be retained by the seller.
Incorrectly filled-in invoices must be kept but marked as 'discarded', so that the number series of the
invoices remains intact. Where outgoing invoices are entered manually in the books, the 'discarded'
invoices can be left out. Where amounts are transferred automatically from the accounting system's
invoice module to the books, incorrectly filled-in invoices must be credited internally.
Reminders
When an invoice has fallen due, you should send a reminder as soon as possible. The faster you put
forward your claim for the invoiced amount, the more likely you are to get it.
7. Cashing up
Minimum statutory requirements for cashing up, and how to do it.
How to cash up
Use one cash register and one cash box: The cash register is used for the day's cash sales and the
cash box is used for paying bills etc.
The cash box is used for paying small bills. You can, for example, start with NOK 3,000 in cash. When
small bills have been paid with money from the cash box, the cash and amounts for which you have
receipts in the cash box will always add up to NOK 3,000.
When purchases are paid for in cash, remember to ensure that your enterprise's name is included on
the voucher.
Make it a rule to always use bank transfers for private withdrawals (and advance payments to
employees). Keep cash payments to a minimum by requesting monthly invoices for small day-to-day
expenses (petrol, office supplies, groceries, computer equipment etc.).
Enterprises with a bookkeeping obligation that engage in ambulant or sporadic cash sales are exempt
from the requirement to have a cash register, provided that the value of the ambulant or sporadic
activities does not exceed three times the National Insurance basic amount in the course of an
accounting year. These enterprises can instead document cash sales on a continuous basis in a
bound ledger the pages of which are pre-numbered, or by keeping copies of dated, pre-numbered
sales vouchers.
The Norwegian Tax Administration: Article on ambulant and sporadic cash sales
Cash reconciliation is carried out using a form. Use a new form every day. The form must be dated
and signed by the person who cashed up.
Attach the day report from the cash register and the card sales report to the back of the form. File the
forms continually in the voucher binder under a separate divider for cash.
If the cash differences exceed +/- NOK 50 per day, you must review the procedures together with your
employees. Remember that the cash box should be used for expenses, if any. The possibility of
making errors is reduced if the cash register is used to calculate the amount to be returned to the
customer.
Many entrepreneurs find that they have to make major changes to their accounting procedures
when they start to employ others. Many choose to employ the requisite competence, or they
outsource the accounting and payroll administration to an accountancy firm.
If you wish to handle payroll administration and reporting yourself, the regulatory framework that you
need to observe is extensive. If you are only required to calculate pay and deduct tax for your
employees, you can create a spreadsheet to keep the figures in order.
Among other things, tax deductions have to be made for free board and lodging, free use of a
company car and the benefit of low-interest loans from the employer. The employee shall present you
with a tax card on which the amount to be withheld is stated. If the employee does not present you
with a tax card, you must deduct 50% withholding tax.
The amount deducted shall be deposited in a tax withholding account no later than on the first
business day after pay day. You can also establish a bank guarantee instead of a tax withholding
account. The tax deducted must be paid to the tax collector on the same day as you submit the
payment record forms for the period. Payment record forms showing the amount of tax deducted
during the past two months must be sent to the authorities via Altinn or to the tax collector in the
municipality where the enterprise is domiciled or has its head office.
The accountancy firm needs to receive a confirmed pay basis on a fixed date. The pay basis shall
include all information that is necessary in order to make correct payments.
Confirmed travel expenses forms are enclosed with the pay basis.
Employee's name:
Personal ID number:
Position:
Tax municipality:
Tax table number and/or deduction rate on tax card:
Pay day:
Pay for the period: from................... to ....................
Gross pay:
Basis for deduction of tax etc.:
- Tax withholding:
= Payment to be made:
To be paid into account number: 1234.56.78900.
Basis for holiday pay:
If necessary information is not included in the travel expenses claim, the recipient risks having to pay
tax on the payment received.
When a subsistence allowance is claimed, the travel expenses claim must also include the following:
Name(s) and address(es) of the place(s) where the employee stayed overnight, and the dates
of overnight stays
The type of accommodation (hotel, guest house or private accommodation) must also be
stated when a night supplement is claimed.
When a car allowance is claimed, the travel expenses claim must also include the following:
Travel route, stating the place of departure and the place of arrival, local driving at the place to
which the employee was assigned, and any reasons for making detours
The total distance driven based on the car's odometer reading at the start and end of each
job-related or business trip
The name(s) of any passenger(s) for whom a passenger supplement is claimed.
For reimbursement of expenses, the travel expenses form must also include:
All expenses documented by receipts/ original vouchers (flights, taxis, overnight stays etc.).
The Ministry of Government Administration and Reform has published updated rates and a program
for preparing travel expenses claims here.
Be particularly careful to fill in where you have stayed overnight. The government subsistence
allowance rates for business travel with overnight stays in Norway are the same regardless of the type
of accommodation. For private accommodation, however, the rate not subject to payroll withholding
tax (the 'portacabin rate') is reduced. If you use the government rate as a basis, the subsistence
allowance in connection with private accommodation must be split into one part that is subject to tax
and one part that is not. The night supplement is not subject to tax, however. One day means the time
of departure plus 24 hours. Note that you can claim a subsistence allowance for two days when
travelling time extends into the next day by more than six hours.
Wage ABC
Norwegian Tax Payment Act
Tax calendar
Government travel allowance rates
Section 11 of the Norwegian Bookkeeping Act states that, in connection with the closing of
accounts at year end, documentation must be available for all balance-sheet items unless they
are insignificant. Stocks of goods are a significant balance-sheet item in many enterprises.
This means that businesses must take stock of all goods owned at 31 December.
Stocktaking can be time-consuming, depending on the quantities stocked. Good procedures relating to
stocktaking can prevent unnecessary use of time. You must also consider when to take stock and
whether the enterprise needs to close during stocktaking. If a shop stays open during stocktaking, it
may for example prove difficult to keep an overview of the goods that are removed from stock while
stocktaking is going on. Stocktaking is therefore often carried out after closing time or on the nearest
holiday/day off. The timing should in any case be consistent with the closing date for the accounts,
which for most people is 31 December.
The stocktaking shall be documented using stock lists; see the Norwegian Bookkeeping Regulations
Section 6-1. These lists must contain a specification of the type, quantity and value of each of the
goods, and a column stating the total for each of the specified goods. A distinction must also be made
between the accounting value and the tax value, as these two will often differ. For enterprises with a
bookkeeping obligation that do not at the same time have an accounting obligation pursuant to Section
1-2 of the Norwegian Accounting Act, it is sufficient to assess the tax value of their stock, including for
accounting purposes. For tax purposes, goods must always be valued at original cost (original cost =
purchase price + related expenses (e.g. customs duty, freight, dispatch etc.) - discounts/bonuses).
Stock write-downs on account of obsolescence or lower market prices are not permitted for tax
purposes.
Enterprises with an accounting obligation must assess both accounting values and tax values.
The lowest of original cost and fair value shall be used for accounting purposes (see Section 5-2 of the
Accounting Act). It is permitted to write down obsolete stock for accounting purposes.
Plan stocktaking well in advance; if possible, tidy up the storeroom/warehouse before you
start.
Stock sheets should be printed from the warehouse system, with specification of all the goods
types.
Prepare stocktaking instructions if more than one person is involved.
Use pre-numbered stock lists or, if applicable, a stock book.
Make sure you have a good system for keeping an overview of what you have taken stock of
at any time.
All goods must be included on the list, including obsolete items.
Do not forget that stock must be accrued:
o If you take stock before 31 December, you must remember to add goods that have
arrived between the stocktaking date and 31 December.
o If you take stock after 31 December, you must deduct any goods bought between 31
December and the stocktaking date.
o Only goods that have been purchased but not sold as of 31 December must be
included.
The lists must be dated and signed by the person who carried out the stocktaking.