We explain what accounting is and the types of accounting that exist.
Learn some basic accounting concepts that will help you understand it better.
Some people may find it more difficult to understand accounting, but once you master certain basic concepts, everything makes sense and it is relatively easy to understand.
But not everyone wants to democratic republic of the congo email list
know and understand accounting; for some business owners, accounting is an unproductive expense, motivated by an imposed obligation , which they would not carry out if they could.
Start of marked textTWEET IT! Accounting is key to making internal and external decisions and must reflect a true image of society. Learn its basic concepts here.End of marked text
It is more than likely that businessmen who are “accounting deniers” will have all kinds of problems arising from the misuse of accounting , and in many cases from its poor management.
Accounting is a key tool for decision-making, both internally and externally (lenders and investors), and therefore must reflect a true image of society .
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1) What is accounting?
Accounting is the recording in accounting entries of all operations carried out in the company, following a chronological order and applying mandatory rules that are included in the General Accounting Plan (PGC).
The PGC states that accounting must be free of errors and reflect a true image of the company.
The latest reform of the General Accounting Plan was approved on November 16, 2007, by Royal Decree 1514/2007, to adapt to European accounting regulations. By Royal Decree 1515/2007, the specific plan for SMEs was approved.
The ICAC ( Institute of Accounting and Auditing of Accounts ), an Autonomous Body, attached to the Ministry of Economy and Competitiveness, is responsible for regulating and interpreting Spanish accounting regulations .
2) Types of accounting
Depending on whether we are looking to obtain internal or external information from accounting, we can define the following types of accounting:
Financial accounting : provides information for both external and internal use. Its maintenance is mandatory for corporations and facilitates, among other things, investors and lenders to decide whether to invest or grant credit to a company.
Cost accounting: this is not mandatory, but is carried out by almost all large companies and many SMEs. This type of accounting facilitates greater control of the business and facilitates decision-making at an internal level. Its purpose is to study how the company's costs and income are distributed in order to obtain internal information for decision-making.
3) What is the purpose of accounting?
The purpose of accounting is to comply with a commercial obligation and to know the financial and economic situation of the organization, with the aim of being useful in control and decision-making. These decisions can be financing, investment, or operational decisions.
Regarding its obligation, this is established in article 25.1 of the Commercial Code, which determines that entrepreneurs, whatever their form, individual or corporate, have the obligation to keep orderly accounting , appropriate to the activity of their company and that allows a chronological follow-up of all their operations, as well as the periodic preparation of balance sheets and inventories .
4) What are accounting entries?
Each accounting entry or record is called an Accounting Entry and it represents the assets that come into play in that economic operation through accounts.
The recording of accounting entries dates back to the Middle Ages, although there is evidence of certain types of accounting from Before Christ.
5) Accounting basics: The double-entry principle
The double-entry principle establishes that "there is no debtor without a creditor, nor a creditor without a debtor," which means that " the sum of the debits must be equal to the credits ."
It was in the 15th century that we have evidence of the use of the double-entry method or principle, which is the pillar of current accounting. During this period, terms currently used such as debit and credit appear, in Latin « dare» and « habere».
6) Which accounting books are mandatory?
The Commercial Code requires keeping two accounting books:
The journal . It chronologically records the amount of all transactions carried out in the development of business activity.
The inventory book and annual accounts . The inventory book must be opened with the company's initial detailed balance sheet (first accounting statement), transcribing at least quarterly, with sums and balances, the trial balances (second accounting statement). In addition, the closing inventory of the year (third accounting statement) and the annual accounts (last accounting statement) must be included annually.
7) Annual accounts of the company
The annual accounts of a company are basic accounting concepts that you should know. They consist of the following documents.
