1.- GENERAL CONCEPTS
Considering that Accounting is a technique that aims to support and optimize the processes of Administration and Economics in a business organization, its teaching requires clearly defined and practical objectives, feasible to apply with exact precision.
basic-manual-accounting-and-practical-casesIt is for this reason that this Manual, aiming to provide basic accounting content, will focus its teaching on the didactic material and student participation in the development of situations and practical cases to be solved.
A brief review of the Objectives, function and purpose of Accounting will be presented in this, and then a brief step through the commercial and banking documentation, which are the documents that record the historical economic events that occurred in the company and that are consolidated as the basis of the accounting records prepared subsequently in the accounting systems that the institution will keep.
Next, the Accounting Concepts and their essential operations will be delivered, finally developing records of basic accounting processes that lead to the preparation, analysis and interpretation of final Financial Statements, such as the Income Statements of a company.
DEFINITION
THE ACCOUNTING is an auxiliary technique of the Economy, whose purpose is to support the processes in the Administration of a company in order to provide efficiency. The information it provides serves to Executives to guide Decision Making regarding the future of the organization.
It is the art of registering, classifying and synthesizing in a significant way, expressing in money the acts and operations that have even partially financial characteristics and interpreting their results.
FUNCTIONS
Historical, it is manifested by the chronological record of the economic events that appear in the life of the company. Ejm: The annotation in order of dates of all the collections and payments that are made.
Statistics, is the reflection of the economic facts in quantities that give a real vision of how the situation of the company is affected. Ejm: See the growth of the company in five years.
Economic, study the process that is followed to obtain the product Ejm: Cost - benefit.
Financial, analyzes the obtaining of the resources, to face the commitments of the company Ejm: See what money the company has, know the deadlines for collections from clients and payment commitments to creditors.
Fiscal, is knowing how the tax provisions affect you, knowing all the existing taxes Ex: VAT, Income, Single Tax, etc.
Legal, to know the articles of the commercial code, labor code and other laws that may affect the company so that the accounting reflects the content of the activity in a legal way. Ejm: Health, AFP, etc.
- TARGET
• Provide a numerical image of what actually happens in the life and activity of the company, know the Heritage and its modifications.
• Provide a base in figures to guide management actions in their decision making.
• Provide the justification for the correct management of the company's resources.
- ACCOUNTING AS A SYSTEM
Within the "company" macro-system there are a variety of Administrative Information Subsystems, among which we find the Accounting Information Subsystem.
- CHARACTERISTICS OF ACCOUNTING INFORMATION
- ACCOUNTING PRINCIPLES
In order for the financial statements to be understood by third parties, they need to be prepared subject to a body of previously known and generally accepted rules or conventions.
The principles are few and represent the basic assumptions on which the standards rest. They necessarily derive from the economic and political factors of the environment, from the ways of thinking and customs of all segments of the community that involves the business world.
The General Accepting Accounting Principles are summarized below, which are determined by
the characteristics of the environment in which the accounting operates.
1.- Equity: Equity between opposing interests should be a constant concern in accounting, since those who use, or use accounting data, may be faced with the fact that their particular interests are in conflict. It follows that the financial statements must be prepared in such a way that they fairly reflect the various interests at stake in an entity. This principle is basically the basic postulate or fundamental principle to which the rest are subordinate.
2.- Accounting Entity: The financial statements refer to specific economic entities, which are different from the owner or owners of the same.
3.- Ongoing Company: It is presumed that there is no time limit on the operational continuity of the economic entity and, therefore, the figures presented are not reflected at their estimated realization values. In cases where there is well-founded evidence to the contrary, this fact and its effect on the financial situation must be recorded.
4.- Economic Assets: The financial statements refer to facts, resources and economic obligations that can be valued in monetary terms.
5.- Currency: Accounting measures in monetary terms, which allows reducing all its heterogeneous components to a common denominator.
6.- Time Period: The financial statements summarize the information related to certain periods of time, which are shaped by the normal cycle of operations of the entity, by legal or other requirements.
7.- Accrued: The determination of the operating results and the financial position must take into account all the resources and obligations of the period, even if they have been received or not paid or paid, in order that in this way the costs and expenses can be duly related to the respective income they generate.
8.- Realization: The economic results should only be computed when they are carried out, that is, when the operation that originates them is perfected from the point of view of the applicable legislation or commercial practices and all the risks inherent in such operation have been properly weighted. In general, it must be established that the “realized” concept participates in the accrued concept.
9.- Historical Cost: The registration of operations is based on historical costs (production, acquisition or exchange); unless in order to agree with other principles the application of a different criterion (realization value) is justified. Corrections to fluctuations in the value of the currency do not constitute alterations to this principle, but less adjustments to the numerical expression of the respective costs.
10.- Objectivity: Changes in assets, liabilities and equity should be accounted for as soon as it is possible to measure those changes objectively.
11.- Prudential Criterion: The measurement of resources and obligations in accounting requires that estimates be incorporated for the purposes of distributing costs, expenses and income between relatively short periods of time and between various activities. The preparation of financial statements, therefore, requires that a sound criterion be applied in the selection of the basis to be used to achieve a prudent decision. This implies that before two or more alternatives, the most conservative should be chosen. This criterion should not be affected by the presumption that the financial statements could be prepared based on a series of inflexible rules. In any case, the adopted criteria must be sufficiently verifiable to allow an understanding of the reasoning applied.
12.- Relative Significance or Importance: When considering the correct application of the principles and norms, they must necessarily act with practical sense. Frequently situations arise that do not comply with the applicable principles and standards and that, however, do not present problems because the effect they produce does not distort the financial statements considered as a whole. Of course, there is no demarcation line that sets the limits of what is and is not significant, and the best criteria must be applied to resolve what corresponds in each case according to the circumstances, taking into account factors such as the relative effect in assets, liabilities, equity, or in the result of the operations of the accounting year.
13.- Uniformity: The quantification procedures used must be uniformly applied from one period to another. When there are reasonable reasons to change procedures, this fact and its effect must be reported.
14.- Background Content on the Form: The accounting emphasizes the economic content of the events even when the legislation may require a different treatment.
15.- Economic Duality: The accounting structure rests on this premise (double entry) and is made up of: a) resources available to achieve the objectives set as goals and b) their sources, which are also demonstrative of the various liabilities incurred.
16.- Fundamental Relationship of the Financial Statements: The results of the accounting process are reported in an integral way by means of a statement of financial position and by a statement of income accounts, both of which are necessarily complementary to each other.
17.- General Objectives of Financial Information: Financial information is basically intended to serve the common needs of all users. Users are also presumed to be familiar with operational practices, accounting language, and the nature of the information presented.
18.- Exposure: The financial statements must contain all the information and basic and additional discrimination that is necessary for an adequate interpretation of the financial situation and of the economic results in front of which it refers.
2.- INVENTORIES
- INVENTORY EQUATION
Every company starts with an inventory, called INITIAL INVENTORY:
"It is a detailed list of the assets and debts that the merchant owns, and with which he begins his commercial activity."
It is made up of ASSETS, LIABILITIES and CAPITAL.
Inventory equals formula is:
- THEORY OF INVARIABILITY OF CAPITAL
According to this theory, Capital must remain unchanged in order to
determine its increase or decrease over the course of an operational period of the company.
In this way, a company will be able to compare its Initial Capital with the Final Capital and determine if:
• Initial Capital <Final Capital = Profit
• Initial Capital> Final Capital = Loss Remember
Capital increases with profits; decreases with losses.
Since the Capital cannot vary, two types of accounts are enabled:
a) Of losses
b) Of gains.
Exercise N ° 8
Determine the equation of a company's inventory
March 2, 2001:
A merchant starts activities with the following contributions:
Cash ………………………….. $ 4,500,000
A commercial premises valued at ……. $ 3,200,000
A truck valued at ………… $ 5,650,000
Letters for debt of 50% truck
Three Letters in your favor, for $ 75,000 each
- EQUALITY OF INITIAL INVENTORY
3.- THE ACCOUNT
"It is a systematic grouping of charges and credits related to a person or situation of the same nature, which are registered under a heading or title that identifies them."
Example:
Income and exits of cash, will be registered in the account called "Cash". The monies that are deposited in the Bank will be registered in the Bank Account. ”
- ACCOUNTING TREATMENT OF "ACCOUNTS"
It is represented by a schematic T. that has two parts:
MUST and HAVE
The only conventional names to identify left and right.
CONCEPTS
a) The entries recorded to the Account debit are called charges.
b) The entries recorded to the credit of the account are called credits.
c) The sum of the charges is called: debits
d) The sum of the fertilizers is called: credits
e) The difference between debits and credits is called balance.
f) When the debits are greater, it is called the debit balance.
g) When the credits are greater, it is called the credit balance
h) When debits and credits are the same, the account is said to be cleared
Remember
• Asset accounts, if they have a balance, this will always be Debtor.
• The Liability accounts, if they have a balance, this will always be a Creditor.
• The Loss accounts will have a debit balance.
• Profit accounts will have a credit balance.
ACCOUNT PLAN
"It is the list of Accounts that a company has determined to use for the development of its accounting processes, which will depend on the nature of the economic activities it carries out." (Ex. The accounting of a hospital is not the same as that of a supermarket).
Chart of Accounts Requirements
1) It must be comprehensive, so as to cover all the activities of the company.
2) It must be flexible, so that it can adapt to the evolution of the company.
3) From a formal point of view, it must have a numerical coding system for the accounts, so that they can be easily identified by groups.
Remember
MUST AND HAVE, MUST ADD THE SAME.
4.- "JORNALIZADOR" ACCOUNTING SYSTEM
You must use the Accounting Books or Records required by the Code in its article 25, which says
To have legal validity, these books must be stamped by the Internal Revenue Service.
It is prohibited to
alter the order and date of the described operations, to leave blank spaces, to make scrapes or amendments, to erase, to tear sheets or to alter the binding.
The Balance Book, is called BOOK INVENTORIES AND BALANCES:
The first accounting entry will be recorded in it, which is the “Initial Inventory of the Merchant, with its Assets and Liabilities
DAILY BOOK
Consists of two columns: MUST and HAVE, which when added together, should always total equal, responding to the accounting principle of DOUBLE ITEM
The entries that are recorded in it are called SEATING or ACCOUNTING ITEMS
Accounting entries
It is defined as the graphic representation of the "Double Item"
Characteristics:
a) Correlative numbering; chronological date
b) Debtor accounts (they are those that register "charges")
c) Credit accounts (those that register "credits")
d) Valuated charges (Debt); Valued fertilizers (Credit)
e) Gloss: brief explanation of the registered commercial operation
Seat Types
Simple entry: it consists of a debtor account and a credit account
Composite entry: one or more debtor and creditor accounts.
Exercise N ° 11
With the following information, record “Journal Book
- The merchant starts activities with $ 1,570,000 in cash; furniture for $ 520,000; a debt with bills for $ 250,000.-
- Open a checking account with 80% of the cash
- Purchase merchandise for $ 1,680,000.- Cancel 30% in cash by check, the balance to the Simple Credit, with a 7% surcharge.
- Lease a commercial premises, $ 300,000.- pay by check
- Sells merchandise for $ 560,000.- cost price, with a 35% profit. They pay 20% in cash, the balance on simple credit with 8% surcharge.
- Cancel, electricity, water, telephone, $ 115,500.- with a check.
- Sells merchandise for $ 618,000.- cost price, with 40% profit. They pay 35% in cash, the balance with 10% surcharge with letters.
- Deposit the cash from the two sales.
- Pay with a check 25% of the initial debt
- Pay by check 30% of the merchandise debt.
DAILY BOOK:
MAJOR BOOK OR CURRENT ACCOUNTS
The transactions registered in the Daily Book are transferred to the General Book.
This book is represented by a Schematic T. for each account with its Debit and Credit.
Function
To group the information and synthesize it, in order to provide the necessary data for the preparation of the Balance.
BALANCE SHEET
It is a final financial statement that shows the economic and financial situation of a company at a certain date.
Economic situation: the ability of the company to generate profits.
Financial situation, understanding the ability of the company to pay off its debts in a timely manner.
• Forms of presentation of the Balance Sheet:
It is made as of December 31 of each year. It comes in two forms:
a) Tax Balance Sheet, called “Tabular” or “8 columns”.
It is an Income Statement. Required by the Internal Revenue Service, for purposes of tax payments. (Annual Income Tax Declaration).
• Operative:
It consists of eight columns:
a) The first four, valued, correspond to the Trial Balance and Balance (debits, credits, debit and creditor balance). THEY SUM THE SAME TWO BY TWO
b) The next two columns, correspond to the Inventory, are: ACTIVE and LIABILITIES. The corresponding balances are recorded in these according to the type of account. SUM UNEQUAL.
c) The last two columns correspond to RESULTS: LOSSES or GAINS. The corresponding balances are recorded here. SUM UNEQUAL.
This is calculated, determining the difference between ASSETS and LIABILITIES and between LOSSES and PROFITS, which must be the same.
Finally, the result of this will be either Loss or Gain.
From the previous example
5.- ACCOUNTING SYSTEM "CENTRALIZER"
System Features:
1.- Simplify the accounting record.
2.- If a manual system is used, it implies division of labor.
3.- Operations are settled chronologically in the auxiliary newspapers which at the end of the month are centralized in summary form in the general newspaper through seats.
The books vary according to the nature of the company, and a book must be kept for each of the main operations to be carried out.
The function and design of the auxiliary newspapers will depend on the company that adopts it, taking into account the number of operations and the information needs that it requires.
System Accounting Basis
1.- Cash-based: Register the operations as they are canceled.
2.- Based on Accumulation: Account for the commitment and then the payment.
Example: On 09/15 a purchase is made from supplier xy according to Invoice No. 1234 for $ 2,050,000.- The purchase is canceled in cash on 09/20.
Cash-based:
In consideration of the foregoing, in the centralizing system all operations are accounted for as credit and subsequently to avoid the overlapping of the figures, payment is regularized in the respective auxiliary newspapers.
Internal vouchers
Auxiliary Books
Accounting Books
6.- PURCHASE - SALE BOOK
Sales and Service Tax DL. 825 Law on Sales and Services Tax
Article 1º DL. 825: Establish, for tax benefit, a sales and service tax, which will be governed by the rules of this law.
Article 2 DL. 825: for the purposes of this law, unless the nature of the text implies another meaning, it shall be understood:
1.- By "sale", any convention independent of the designation given by the parties, which serves to transfer for consideration the domain of personal property, personal property owned by a construction company built entirely by it or that in part have been built by a third party for it, a share of ownership of said goods or real rights constituted on them, as well as any act or contract that leads to the same purpose or that this law equates to sale.
2.- For "service", the action or benefit that a person performs for another and for which he receives an interest, premium, commission, or any other form of remuneration, provided that it comes from the exercise of the activities included in No. 3 and 4 of article 20 of the Income Tax Law.
3.- By "seller", any natural or legal person, including communities and de facto companies, who is routinely engaged in the sale of personal property, whether they are their own production or acquired from third parties. Likewise, the construction company will be considered a “seller,” meaning any natural or legal person, including communities and de facto companies, that is routinely engaged in the sale of real property owned by him, built entirely by him or her. that have been partly built by a third party for it. It will be up to the Internal Revenue Service to qualify, in its sole judgment, habituality. A “seller” is also considered a producer, manufacturer or construction company that sells raw materials or supplies that, for any reason,do not use in your production processes.
4.- By "service provider", any natural or legal person, including communities and de facto societies, that provides services on a regular or sporadic basis.
5.- For a “tax period”, a calendar month, unless this law or the National Directorate of Internal Taxes indicates a different one.
Article 3 DL. 825: for the purposes of this law, natural or legal persons, including communities and de facto companies, who make sales, provide services or carry out any other operation subject to the taxes established in it, are taxpayers.
Article 4 DL. 825: the sales of personal property and real estate located in the national territory, regardless of where the respective convention is held, will be taxed with the tax of this law.
Article 5 DL. 825: the tax established in this law will be levied on services rendered or used in the national territory, whether the corresponding remuneration is paid or received in Chile or abroad.
Article 6 DL. 825: the taxes of this law will also affect the Treasury, semi-fiscal institutions, autonomous administration bodies, municipalities and the companies of all of them, or in which they have participation, even in cases where the laws that govern them exempt them of all kinds of taxes or contributions, present or future.
Article 7 DL. 825: the taxes established by this law shall be applied without prejudice to the special taxes contemplated in other laws that tax the sale, production or import of certain products or merchandise or the provision of certain services.
Article 14 DL. 825: taxpayers affected by the provisions of this will pay the Tax with a rate of 19% on the tax base.
Article 20º DL. 825: constitute a monthly tax debit the sum of taxes levied on sales and services made in the respective tax period.
The tax to be paid will be determined, establishing the difference between the tax debit and the tax credit, determined according to the norms of paragraph 6.
Article 23 DL. 825: (paragraph 6) taxpayers affected by the payment of the tax of this title will be entitled to a tax credit against the tax debit determined for the same tax period.
Article 25º DL. 825: to make use of the tax credit, the taxpayer must prove that the tax has been charged on the respective invoices or paid according to the income receipts of the tax in the case of imports, and that these documents have been recorded in the books.
Article 26º DL. 825: if a remnant of credit in favor of the taxpayer results from the application of the norms contemplated in the preceding articles, with respect to a tax period, said unused remnant will be accumulated to the credits that have their origin in the immediately following tax period. The same rule will be applied in the successive periods if a surplus in favor of the taxpayer subsists as a result of these accumulations.
Article 27º DL. 825: for the purposes of allocating the remnants of the tax credit to the debits generated by the operations carried out in the immediately following tax periods, taxpayers may readjust said remnants, converting them into monthly tax units according to their amount in force on the date in which the tribute must have been paid.
Article 51º DL. 825: for the control and inspection of taxpayers of this law, the Internal Revenue Service will keep, in a manner established by the regulations, a Registry based on the Unique Tax Role.
To this end, people who initiate activities that may give rise to taxes of this law, must request their registration in the Single Tax Role, before starting such activities.
VAT ON PURCHASES AND SALES
VAT FISCAL CREDIT: when a company buys merchandise it has to pay a price that includes the net value of the merchandise plus the value added tax. To reflect in the accounting the VAT paid on purchases, the account called VAT Tax Credit is used. This is an Asset account, because the canceled VAT is "in favor of the Company", until the compensation is made with the Sales VAT.
PURCHASE PRICE = NET PURCHASE VALUE + 13% VAT
VAT FISCAL DEBIT: when the company sells merchandise it has to charge the client a price that includes the value of the merchandise plus the Value Added Tax, to reflect in the accounting the VAT of the sales charged to the client, an account called VAT is used Fiscal debit. This is a Liability account, because the VAT collected is a “value owed to the treasury”, until the compensation is made with the VAT of the purchases.
SALE PRICE = NET SALES VALUE + 13% VAT
At the end of each month, companies have to COMPARE the VAT of purchases with the VAT of sales to declare the remainder or payment of Tax.
VAT HIGHER CREDIT VAT DEBIT: this case occurs when the purchase tax exceeds the sales tax. As a result, a Remaining Iva is obtained that is accumulated and transferred for the following month, the Remaining Iva is an Asset account.
REMAINING VAT = PURCHASE VAT> SALES VAT
VAT HIGHER DEBIT VAT CREDIT: this case occurs when the sales tax exceeds the purchase tax. As a result, an Iva to Pay is obtained, the Iva to Pay is a Liability account.
VAT TO PAY = SALES VAT> PURCHASE VAT
The Remaining VAT or VAT to Pay is declared on form No. 29 of the SII, which is paid no later than the 12th of each month. (Article 64º DL 825).
Sales Journal
Shopping Journal
Exercise Nº 1: Don Zacarías Labarca Del Río has the following movement in the month of September.
In the month of October, make the following movements.
It is requested:
Prepare Purchase - Sale Book
Determine Tax Payment
Centralization in Daily Book
Adjustment Seats
Exercise Nº 2: Doña Zoila Vaca has the following purchase and sale movement in April.
Omission or Presentation of Out of Term Returns: (Monthly return form 29)
This infraction is one of the most common, it generally originates from the lack of financing on the date of its payment, however the taxpayer must bear in mind how expensive this delay is, since the infraction accrued during the first month or fraction of the month, an 11.5% surcharge (1.5% criminal interest plus a 10% penalty) plus 1.5% for each month or fraction of the month, plus 2% also for each month or fraction, this last with a 30% cap. The following example will illustrate this violation.
Example:
A taxpayer must pay on April 12, 1996, his taxes for the month of March and amounting to $ 450,000.-, which due to lack of financing only canceled on 11/30/96.
It is asked: Determine the total amount to pay.
Development
a) The first thing to determine is the readjustment of the unpaid amount, which in this case we estimate 7% of CPI.
Then: $ 450,000 × 7% = $ 31,500 Readjustment.
b) Next, the criminal interest will be determined, which amounts to 1.5% for each month or fraction of the month, in this particular case the total interest is 12% (From April to November there are 8 months of arrears due to 1.5% equals 12%). This percentage is applied to the tax due duly adjusted.
Nominal Tax $ 450,000.-
More: Readjustment $ 31,500.-
Total $ 481,500.- For interest 12% $ 57,780
c) Finally, we must calculate the fine, which amounts to 10% for the first month or fraction of the month, adding 2% for each new month or fraction of the month, with a cap of 30%; in this particular case the total fine is 24%. Percentage explained as follows:
April 10% (First month or fraction of month, as the obligation expired on April 12 to 30 of the same, the fraction occurs).
This percentage is applied to the tax due duly adjusted.
Adjusted Tax $ 481,500.
Comment
As you can see, the final amount to pay represented $ 204,840 more, that is, a 45.5% surcharge. Consequently, and taking into account these figures, we conclude that it was not advisable to owe the State at all, and we found in this situation that the most convenient is to obtain external financing, institutions that for an 8-month loan would never apply a rate higher than one 11% figure much lower than that determined with figures and percentages in this example (45.5%)
Exercise:
A taxpayer must pay on May 12, 2004, their taxes for the month of April and amounting to $ 120,000.-, which due to lack of financing only canceled on 09/30/2004. We estimate 8% of CPI.
It is asked: Determine the total amount to pay.
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