Basic concepts of accounting systems

Workshop on basic concepts of accounting systems

You were hired for the MPC company, to install a system that allows you to control all your accounting, financial and administrative operations and provide you with information regarding: sales, inventories, accounts receivable, income, costs, expenses, etc.

That makes?

As it does?

How do you control cash?

Establish sales and billing control (forms and diagrams).

Classify fixed assets. Establish controls.

Prepare Proforma Profit and Loss Statement.

Prepare pro forma Situation Statement.

Definitions of Accounting System.

Accounting system is an organized structure through which the information of a company is collected as a result of its operations, using resources such as forms, reports, books, etc. and that presented to management will allow it to make financial decisions.

An accounting system is nothing more than rules, guidelines, procedures, etc. to control the operations and supply financial information of a company, through the organization, classification and quantification of the administrative and financial information that is provided to us.

For an accounting system to work efficiently, its structure-configuration must meet the established objectives. This network of procedures must be so closely linked that it integrates in such a way the general outline of the company that it may be possible to carry out any important activity of the same.

PROCEDURES FOR INSTALLING AN ACCOUNTING SYSTEM

Have knowledge of the company (through interviews, visits, etc.) Prepare a checklist. Prepare reports. Prepare Accounts Catalog and Procedure Manual. Design forms for all operations. Design reports. Prepare books. Initial balance

Check list: it is a form that has all the data of a company related to: its name, physical location, commercial / industrial activity, number of employees, equipment, capital, general data, etc. It is supplied by the person who is going to install the accounting system.

Reports: they express the situation of the company. These are made up of:

The Balance Sheet G & P Status

There may also be additional reports at the discretion of management such as:

Estimated Cost Statement Sales statistics, etc.

Management uses them to evaluate their performance and determine their financial position each month. They present monthly and accumulated figures during an exercise.

Qualities.

It presents proposals for the proper functioning of the company.

It contains the parameters of good communication: clarity, coherence, stratification, etc.

Catalog of Accounts: contains all the accounts that it is estimated will be necessary when installing an accounting system. It must contain enough flexibility to incorporate the accounts that must be added to the system in the future.

Goals.

Allow different employees to keep records consistent with the implementation of a similar account catalog. Facilitate accounting work, especially when it comes to consolidating financial figures. Facilitate and satisfy the need for daily records of the operations of a company or entity.

The accounts in the catalog must be numbered. The numbering is based on the decimal metric system. It begins by assigning an index number to each group of accounts both in the Balance Sheet and in the income statement, as follows:

Balance sheet

Assets Liabilities Capital

Statement of income

Income 7- Other income Costs 8- Other expenses Expenses

In the accounts, debit and credit items are basically recorded to obtain a balance.

Coding is considered as a preliminary operation for classification.

Procedure manual: it is the guide that explains how we can use the catalog. It tells us which are the debtor or creditor accounts.

Forms: they are all forms printed in order to collect information in the different areas of a company. They constitute an element that as long as it is authorized (signed) can serve as proof to guarantee an operation.

The vouchers are forms that fulfill an outstanding mission in the functional mechanism of the accounting regime, such as registration, information and control elements (invoices, receipts, etc.)

Every operation must be backed by a voucher or form that allows its proper accounting and that serves to know the different data.

Requirements of any form:

Numbering That contains all the necessary data to facilitate control Clear writing, without errors In addition to the original, issue the necessary copies Post signatures

Among the main forms we have:

Invoices Receipt Lead Purchase orders Others, etc.

The receipt is a document in which a person acknowledges having received a certain sum of money in cash or by check made out to him, a promissory note, merchandise or other goods. Receipts are usually issued in duplicate. The original is given to the person making the payment and the copy is kept by the recipient.

The leads are produced by the warehouse the original and at least two copies. The original is sent to the customer along with the merchandise. Copy to accounting / file. The purpose of this form is to detail the merchandise that has been dispatched from the warehouse prior to the dispatch order received by the sales department.

The purchase order is a commercial form that identifies the merchandise and / or products that a company wants to buy.

The debit note is used to post an item in favor of the company and against a creditor or client. It can be issued in three copies. The original is sent to the person who must bear the amount. The duplicate and triplicate, as well as the invoice, are used for their records in the respective auxiliary journal and in the original entry books.

The credit note is a notification that is sent to the customer in favor of their account. These are oriented in favor of customers in the Sales Journal and the Credit Notes in favor of the company in the Purchase Journal.

The check is an order of payment given on a bank in which the drawer has funds deposited in current account to his order or overdrawn credit. In short, it is a means by which a person / company orders a bank to pay a sum of money, provided they have a balance in their favor or authorization to turn even if they do not have a balance.

The cash outlay is a form that is filled when there is an outflow of money to make payments for different concepts.

The requisition of office supplies and equipment is a form that the company sends to a company to place an order for expendable material. It can be internal and processed by the supply department or external to be ordered outside the institution.

Among the reports we can mention:

PayrollShoppingChecks issued

The reports will be made according to what the management of the company asks the person to install the accounting system.

Payroll is the list of people who work in a company with an indication of their salary.

Financial statements: are those that present the situation of the company, among these we have the Balance Sheet; The Income Statement, etc.

The financial statements result from the relationship between the items of the asset that represent liquid resources and the debts of the company to be paid within the same settlement periods of the asset.

The Balance Sheet presents the situation of a company, that is, its operating resources as well as its short / long-term debts.

The Income Statement explains whether the company obtained any type of profit or failure during a certain period.

The accounting books: are those in which the information provided by the forms is permanently recorded. Books where the operations of the company are established in order to fulfill the obligations that the law imposes in this regard and to obtain the information or data necessary to know its situation and results by means of balance sheets and statements showing profit and loss.

The Diaries: in which the information is registered chronologically, that is, the daily registry of the operations. They are also known as original entry books.

The greatest general: one who collects the information previously recorded in the newspaper. It is known as a second entry book. It is the official book, since it serves as a source of information to compose the financial statements.

There are other books, such as the inventory book, which contains a detailed list of ending stocks ready for sale valued at cost.

The accounting department is the center of the company where all financial information is classified, recorded and interpreted, which will be received through the internal control mechanism.

Internal control: that it is not more than an organization plan of all the coordinated methods in order to:

Protect assets

Verify the accuracy and reliability of financial information

Promote the efficiency of operations.

Internal control is classified into: Administrative internal control and Accounting internal control.

Administrative internal control: methods, measures and procedures that have to do fundamentally with the efficiency of the operations and with the fulfillment of the administrative measures imposed by the management.

Internal accounting control: methods, measures and procedures that have to do mainly with the protection of assets and the reliability of accounting data.

Among the areas that we must establish internal control we have:

Petty Cash Assets

Cash Inventories

Sales Etc.

Every internal control system must contain the following characteristics:

Organization- in such a way that the authority and responsibility related to the company's activities can be differentiated.

Authorization and operational registration - so that it is the responsibility of the accounting department to make the records of the information and maintain control

Efficiency- to prevent at least three (3) people from intervening in certain types of operations to avoid fraud.

Internal Cash Control.

Cash is the money that every company keeps in its cash account or as a deposit in a commercial bank. Values in legal tender or its equivalent contained by:

Cash on hand

Bank accounts

Everything available for unrestricted payments.

Internal cash control measures are aimed at reducing errors and losses.

Cash reception can be done in three ways:

Counter operations (sales)

Income executed by collectors

Remittances by mail

Counter operations are performed by companies in the store. Among the control measures we can mention:

Use of cash registers and invoices in order to facilitate the daily chart of these incomes. The reconciliation must be carried out by a single employee who does not belong to the cashier area.

3) All receipt must be supported by an income receipt.

The cashier should not have access to the ledgers.

Revenue made by collectors is controlled by keeping a strict watch on all collectors so that:

A list of all invoices or documents to be collected is prepared daily. That at the end of the day, they deliver the money collected together with the aforementioned relationship. That these documents are under the responsibility of a single person or preferably by the collection department and credits.

Remittances received by mail are entrusted to a trustworthy person who receives them and prepares a report which will then be sent to the accounting department.

We can establish that the cash area includes:

Cash and Bank

The box is divided into two:

. Petty cash

. General box

The petty cash is the fund that the company uses for minor expenses within it that do not require the use of a check.

The general box is the one where all the daily money received for different concepts is kept.

Among the control measures are:

Have flyers, whether they are cash deposit or disbursement. That these flyers are numbered Handled by a single person The general box should not be used for operational purposes and withdrawals, for this the petty cash was created. Deposit the money from the general box I enclose the cash receipts.

Internal Control of Sales .

About the sales department we can say that it occupies an important role in the installation of an accounting system.

Internal sales control includes procedures and methods in order to achieve the policies established by the company.

When a sale is made, an invoice must be drawn up for the customer. When the payment is made, the cashier must prepare a receipt for deposit. However, in order to dispatch the merchandise from the warehouse, they must do so through a driver.

The forms that we can use for a good control of sales are:

Invoices (which among other things must specify the terms of payment - cash or credit).

Dispatch or drive note

Cash receipt.

Each of these forms should have enough copies to be distributed to the different departments / clients.

The pro-forma invoice is used in banking procedures, serving as the basis for requesting foreign currency (eg) through the letter of credit, supplier credit, collections, etc. It consists of prices and conditions of sale of the products.

Letter of credit: it is a document issued by a commercial bank at the request of a client authorizing a foreign firm to send merchandise, according to terms, and which will be paid by the bank according to the credit granted by the seller. The value of it must be equal to that of the commercial invoice.

Supplier credit: a line of credit is offered by commercial banks to their best and most solvent clients; Through this the company can sign promissory notes up to the amount of this credit to buy its merchandise. It can be renewed annually.

About internal sales control we can say:

That these are carried out accompanied by the corresponding voucher. That when leaving the merchandise it is reviewed by the person in charge. That the vouchers are reviewed and accounted for.

Classification and Control of Fixed Assets.

Fixed assets are made up of properties of a relatively permanent nature, which are used in a company for its operations without the intention of selling them.

Fixed assets can be:

Tangible or Intangible

Tangible: if it has bodily substance, that is to say physical. For example:

Buildings- subject to depreciation; Forests- subject to exhaustion

Intangibles: like patents, copyright, its value resides in the rights that the owner owns.

Assets are subject to depreciation which is nothing more than the equitable distribution of the acquired cost of a good plus the investments made in it to be used between an estimated period of life.

Depreciation can be done by three methods:

Straight line, Units produced, Hours worked.

Among the control measures we have:

Establish their identity, establishing homogeneous groups and describing them.

Have a detailed and up-to-date list. Locate them to carry out inventories, carry out repairs, calculate depreciation. Make a periodic check of the same. Establish responsibility to the person who uses the fixed assets.

Inventories.

Inventories are items of current assets that are ready for sale. Merchandise owned by a company in the warehouse valued at acquisition cost, for sale or productive activities.

The internal control of inventories begins with the establishment of a purchasing department, which must manage the purchases of inventories following the purchasing process.

There are several methods to carry inventory management and control, which are:

PEPS (First Enter First Exit)

UEPS (Last to Enter First to Exit)

PEPS method: type of perpetual inventory that details, by means of the Inventory Control Card, the exits and entries of the merchandise. It establishes that the first merchandise to be purchased is the first to be sold or to be released.

UEPS method: type of perpetual inventory that establishes that the last goods to be bought are the ones that are first sold or sold.

Among the internal control measures we have:

Periodically do physical counts. Check physical inventories with accounting records. Protect inventories in a covered warehouse with doors so that thefts are avoided. Deliver goods only with authorized requisitions. Protect inventories with an insurance policy. Do random checks to compare with the ledgers.

Income: are items of creditor origin and are part of the nominal accounts and the income statement.

Income originates from different concepts such as:

Sales, fees, interests, commissions, etc.

Check list

Organization and classification of the company

A-1 Name and address of the company

A-2 Branches and Agencies, name and address

A-3 type of business they carry out

A-4 Class of company or sole proprietorship

.1 Company by shares

.2 Simple Limited Partnership

.3 Composite Limited Partnership

.4 Joint Venture

.5 Sole proprietorship

A-5 Partners

A-6 Board of Directors and other officials and officers

A-7 History of capital

.1 Original Investment

.2 Subsequent Investments

.3 Capitalized Earnings

A-8 Basis of distribution of profits and losses

A-9 In the case of a stock company

.1 Share class

.2 Number of shares of each class

.3 Nominal value of the shares in each class

.4 Shares of each class circulating

.5 Authorized capital

A-10 Company Records

A-11 Persons responsible for these records

A-12 Place where records are kept

A-13 Fiscal year end date

Functional and departmental division.

B-1 functional division

B-2 List of company departments, accompanied by

main transactions carried out in each department.

B-3 Form of each department

B-4 Personnel of each department

B-5 Location of each department

Used and used books and records.

.1 Original input

.2 secondary entry

Account code

.1 Combined number or letters or numbers and letters

.2 Classification of accounts in the code

Reports and statuses

.1 Balance Sheet

.2 Income Statement

.3 Etc.

Mechanical equipment to be used

.1 Adding machine

.2 Calculating machines

.3 Posting and normalizing machines

.4 Etc.

Administrative control over operations

.1 Cash receipts and disbursements

.2 Inventories

.3 Accounts receivable

.4 Cost

.5 Expenses

.6 Payroll

.7 Accounts payable

.8 Investments

.9 Fixed Assets

.10 Budgets

.11 Internal Audit

accounting department

.1 Staff

.2 Registration system

.3 Mechanical equipment

.4 Conditions of the premises

.5 Temperature in the room

Accounts Catalog

Cash and Bank

111 Cash

112 Petty Cash

113 Banks

1131 Reserve Bank

1132 Banco Popular

1133 Bank of Commerce

Accounts Receivable

121 Accounts receivable from clients

122 Accounts receivable officers and employees

123 Other accounts receivable

12R Reserves for bad debts

Inventories

131 Goods

132 Raw material

133 Products in process

134 Finished Products

Fixed assets

21 Land

22 Buildings

22D Accumulated depreciation of buildings

23 Machinery and equipment

23D Accumulated depreciation of machinery and equipment

24 Transport equipment

24D Accumulated depreciation of transport equipment

25 Furniture and office equipment

25D Accumulated depreciation of office furniture and equipment

Deferred assets

31 Expenses paid in advance

311 Insurance paid in advance

312 Patents paid in advance

313 Interest paid in advance

314 Rentals paid in advance

Other assets

32 Finance

33 Deposits

331 Codetel

332 CDE

333 CAASD

334 National Cable Car

Liabilities (2)

41 Accounts payable

411 Suppliers

412 Suppliers

413 State Institutions

414 Others

42 Documents payable

43 Withholdings payable

431 Social Security

432 Income Tax

433 Infotep

434 Bank of Dominican Workers

435 Labor Benefits

436 Easter Regalia

437 Other withholdings

44 Interest collected in advance

45 Income collected in advance

451 Financial services

452 Rentals charged in advance

Capital (3)

51 Capital

52 Result for the period

Income (4)

61 Sales

611 Cash sales

612 Credit sales

Other income

62 Income from services

63 Interest collected

64 Donations

65 Revenue from sales of fixed assets

Costs (5)

500 Cost of sales

Expenses (6)

100 General and administrative expenses

1001 Salaries

1002 Holidays

1003 Fees

1004 Overtime

1005 Diets

1006 Entertainment expenses

1007 Depreciations

1010 Insurance

1011 Office supplies

1012 Water service

1013 Telephone service

1014 Electric service

1015 Legal fees

1016 Propagan

1017 Freight and shipping

1018 Bad debts

1019 Maintenance and repairs

1020 Fuels and lubricants

1021 Property rental

1022 surveillance service

1023 Others

200 Financial Expenses

2001 Interests

2002 Commissions

2003 Closing expenses

2004 Blackberry

300 Selling Expenses

3001 Salaries

3002 Commissions

3003 Shopping

3004 Discounts on purchases

700 Profits and losses

Procedural Manual

Current assets- of debtor origin

11 Cash and Bank

debit origin debits account and an income is recorded either by check or in cash is credited when the outflow of money is recorded either by check or cash

111 Cash

debtor origin of cash and bank debits if cash enters cash is credited if cash comes out

112 Petty Cash

of origin debtors auxiliary cash and bank debits each time money enters the petty cash and is credited each time money comes out of petty cash and is credited to liquidate the petty cash fund

113 Banks

of debtor origin, cash and bank debits each time money enters the bank, credits each time money goes to the bank

12 Accounts receivable

of debtor origin debits each time a client contracts a debt with the company and is credited each time the client pays the debt he has with the company and is credited if the client pays the debt

13 Inventories

of debtor origin debits when the company buys materials to sell it credits when it withdraws materials for sale, as long as a perpetual method is used to record the operations