Accounting Basic concepts

Accounting Basic concepts

Since ancient times the man is forced to carry logs and controls of possessing it, by what we can define Accounting as annotations, calculations and States numerical lead both individuals and legal, in order to register, classify and control property values.

Accounting is a tool that can help us to easily reach a budgeted life without overdrafts.

In business terms accounting can help us with: 

• Show numerically what happens in the company
• Indicated as the real life of a company is

This is due to that is should register all the movements that take place and this allows to control entries, exits, money subtractions, also can keep track of income and expenses, allowing to justify and explain to the owners if the company's sustainability. Is of great importance that all the accounting process generally accepted accounting principles:

• "Principle of regularity: Regularity can be defined as conformity to enforced rules and laws.

• Principle of consistency: This principle states that when a business has once fixed a method for the accounting treatment of an item, it will enter all similar items that follow in exactly the same way.

• Principle of sincerity: According to this principle, the accounting unit should reflect in good faith the reality of the company's financial status.

• Principle of the permanence of methods: This principle aims at allowing the coherence and comparison of the financial information published by the company.

• Principle of non-compensation: One should show the full details of the financial information and not seek to compensate a debt with an asset, revenue with an expense.

• Principle of prudence: This principle aims at showing the reality "as is": one should not try to make things look prettier than they are. Typically, revenue should be recorded only when it is certain and a provision should be entered for an expense which is probable.

• Principle of continuity: When stating financial information, one should assume that the business will not be interrupted. This principle mitigates the principle of prudence: assets do not have to be accounted at their disposable value, but it is accepted that they are at their historical value

• Principle of periodicity: Each accounting entry should be allocated to a given period, and split accordingly if it covers several periods. If a client pre-pays a subscription. The given revenue should be split to the entire time-span and not counted for entirely on the date of the transaction.

• Principle of Full Disclosure/Materiality: All information and values pertaining to the financial position of a business must be disclosed in the records.

• Principle of Utmost Good Faith: All the information regarding to the firm should be disclosed to the insurer before the insurance policy is taken."

Summary accounting provides information on the actual status of a company through financial statements, this facilitates to decision-making is correct, because these decisions up to the company to improve or go into decline.

According to the above information is important for us to apply these basic principles of accounting to get a better result in the development of the company, this is an instructional support for walking and maintaining transparency and accountability in the management of the institution .

Written by
Angie Rivera



 

Sources consulted:
Author: Gerardo Guajardo
Second Edition
http://www.infomipyme.com/