In UKKO Private Trader, bookkeeping is done on a payment basis and VAT is also calculated on a payment basis. The service is intended for small-scale operations, where payment-based bookkeeping makes the entrepreneur's everyday life easier, as it facilitates the ability to pay and takes care of a steady cash flow.
The basis of payment and the basis of completion are bookkeeping principles used in bookkeeping, which affect when transactions are entered in the bookkeeping.
In payment-based bookkeeping, expenses are incurred when money leaves the bank account and sales are incurred when the money arrives in the bank account. Regarding expenses, the entry is made so that the money leaves the credit of the bank account, and the money enters the debit of the expense account. In sales, however, the recording is the opposite, as the money goes to the debit of the bank account and is recorded to the credit of the sales account. Another big advantage of payment-based bookkeeping is that the company pays the VAT included in the sales to the tax administration only when the customer pays the sales invoice to the company's bank account. The company benefits from this if the sales invoices are large with long payment intervals.
In accrual-based bookkeeping, all expenses and income are recorded when they occur, i.e., the expense is recorded according to the invoice date to the debit of the expense account and the credit of accounts payable. When the invoice is paid, it is posted to the credit of the bank account and a counter entry is made to the debit of the accounts payable, so that the accounts payable is zeroed out and the company does not owe the supplier. In sales invoices, on the other hand, the entry is the opposite, when the entry is made according to the date of the invoice to credit and accounts receivable to debit. The advantage of accrual-based bookkeeping is up-to-date and accurate information that you can follow and stay on top of the company's financial situation.