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Small Business Accounting Terms Explained in Plain English
The everyday terms you meet most: revenue, expenses, profit and cash flow Danish essentials explained simply: VAT, CVR and the fiscal year How to recognise each term in your own accounts without an accountant
Accounting has a reputation for using words that sound harder than the things they describe. Revenue is income earned from sales. Expenses are costs recognised in running the business; the cash may move at a different time. Once you know the small handful of terms you actually meet day to day, your paperwork stops feeling like a foreign language.
Here are the terms a small business owner runs into most often, explained the way you would explain them to a friend.
The everyday terms you meet most
Revenue
Revenue, sometimes called turnover or sales, is the money your business earns from selling what it sells, before you take anything off. If you earn 40,000 DKK from sales during a month, excluding VAT, that is 40,000 DKK of revenue. The precise timing follows your accounting method. It is not the money sitting in your hand yet - it is the money you have earned. That difference matters later, when we get to cash flow.
Expenses
Expenses are the costs recognised in running the business, such as rent, software and phone services. Purchases such as equipment or a van may need to be recorded as assets, with their cost spread over time. Keep the supporting documents. Tax deductions depend on the business purpose and the rules for each cost; private costs are not deductible, and mixed-use purchases need an appropriate split. A shoebox of faded receipts is not the same as a record.
Profit
Profit is what is left when you take your expenses away from your revenue. Revenue minus expenses equals profit. It is easy to assume profit is the same as the money in your bank account. It is not. You can be profitable and still short of cash, and you can have money in the bank while running at a loss. Profit measures how you did over a period of time, not what your account looks like this morning.
Cash flow
Cash flow is the movement of money in and out of your business, and when each movement happens. A customer who pays in 60 days is good news for your revenue and bad news for your cash flow if your supplier wants paying next week. Late customer payments can leave a business short of cash even when it is profitable.
Gross and net
Gross means before deductions; net means after. The words are used in slightly different ways depending on who is talking, which is why they trip people up. On a Danish invoice you will usually see the amount excluding VAT and the total including VAT both shown, so you can always see which figure you are looking at. When in doubt, check the label rather than the number.
Danish essentials explained simply
VAT (moms)
VAT is the tax added to most goods and services in Denmark. If your business is VAT-registered, you charge VAT on taxable sales and may deduct eligible input VAT on business purchases, subject to the documentation and deduction rules. Private use and some expense types have limits. You report sales VAT and deductible input VAT to Skattestyrelsen for your assigned period, which may be monthly, quarterly or half-yearly. What most owners call VAT, the paperwork calls moms, and a VAT-registered business is momsregistreret. One thing worth remembering: you do not keep the VAT you collect. You are holding it until it is reported and paid.
CVR
CVR is your company's registration number, the eight-digit number that identifies your business in Denmark. It is used on invoices and other official business information. When a customer asks for your CVR number, they are asking for that identifier - not for a certificate or a document.
The fiscal year (regnskabsår)
The fiscal year, or regnskabsår, is the period your accounts cover. For most Danish small businesses it follows the calendar year, from 1 January to 31 December, but it does not have to. Whatever period you choose, your revenue, expenses and profit are all measured across that stretch of time. So when someone asks what you did last year, they mean this period.
How to recognise each term in your own accounts
You do not need to memorise definitions. You need to be able to find each figure and know roughly what it means.
- On an invoice: the amount excluding VAT, the VAT itself, and the total including VAT.
- In your bank: money in, money out, and the date each one happened. That is your cash flow.
- Across a month or a year as a whole: revenue, expenses and profit, all measured over the same period.
Once you can point to each figure, the jargon loses most of its power. You are no longer guessing what a word means. You are reading your own business.
Keeping it all in one place
The reason these terms feel confusing is rarely the words themselves. It is that the numbers live in different places - an invoice here, a receipt there, a bank app somewhere else - so you never see them side by side.
Kaupify is built to put the everyday accounting back together in one place. Send an invoice, keep your bills and receipts with it, reconcile the payments that come in, and see what the month actually looks like. Plain numbers, in plain English, without the accounting jargon. Book a demo to see the relevant tools and discuss availability for your business.
Your business, in clear view.