Accounts and items in the financial statements

1. Introduction

For the preparation of the most complete and accurate financial statements, it is necessary to know a little about the accounts or items that comprise it. With this purpose this work is developed; which must contain the way of recording daily commercial activities, in terms of money; purchases and sales of merchandise, credits, debts and others. The accounts of registers are classified in real and nominal.

In the real accounts, the assets, liabilities and capital of the company are treated.

In the nominal accounts, the items of income and expenses are treated.

In assets:

Fixed Intangible Assets

Right Land Box

Petty Building Capital Gains

Accounts receivable Machinery Patents.

Equipment Inventories

In Liabilities:

Deferred currencies

Accounts payable Prepayments.

Effects payable

Taxes to pay

In the Capital: -. Social capital

-. Common Stock Capital

-. Preferred Share Capital

2. Development

Accounts are generally divided into the following classes:

Accounts "Real" accounts comprise the assets, liabilities and liquid capital of a trade, and since they are an integral part of the balance sheet, they are called balance sheet accounts.

The "nominal" accounts record the merchant's expenses and income and how they are used to formulate the Profit and Loss statement.

Assets: they are economic resources or goods, property of a business, with which profits are obtained; the assets of a business vary according to the nature of the business; a small company can have a single vehicle, a modest office; while a large department store or factory may have buildings, machinery and equipment, land, furniture, accounts receivable and others.

Cash: Accountants use the word cash to designate coins, bills, checks, money orders, and money deposited in banks, not including postage stamps, cashier vouchers, or postdated checks.

Cash: Available current assets, represents the cash that the company maintains to make its payments often; increases due to when it is decided to increase the petty cash fixed fund and decreases due to it when it is decided to eliminate the fund.

Petty Cash: through petty cash, minor expenses are made that do not warrant the preparation of a check; the amount of the fixed fund, and the maximum amount of payment by petty cash depend on the nature of the business, its volume of operations and the frequency with which petty cash is used; petty cash can be kept in a small safe; A petty cash fixed fund is understood as the amount with which this account is created and the amount to which we must carry after redemption.

Bank: represents the money that is in a banking institution as deposits, represents an available current asset increases when it is deposited, that is to say by the debit and decreases when checks are issued against the bank.

Temporary Investments: Many companies sometimes invest idle funds in realizable securities, for temporary investments, protection purposes, amortization fund provisions and other objects, in these cases, the accounting system must see if the investments they have been recorded, in detail, with accuracy and punctuality and they are defended from unauthorized manipulations; they represent an available current asset increases by debit and decreases by credit.

Investments in shares: these are investments that are made in order to value said shares, so that after a time they can be resold, thus recovering the invested capital and obtaining profits that in some cases represent considerable amounts.

Accounts Payable: Current Assets required, includes the amounts receivable in the account open to the debtors for operations of the business, the accounts receivable from the shareholders, officers or employees.

Clients: this account is created at the time of a credit sale, registered as debt of the clients represented with their respective invoices, this account is created in order to keep a detailed record of the external and internal accounts receivable.

3. Estimation of Accounts

Bad debts: there is no way to tell in advance which customer accounts will be collectible and which of them will be worthless; therefore, it is not possible to credit the account of any particular client to reflect a total estimate of credit losses during the year; it is also not possible to credit the accounts receivable control account in the general ledger; the only alternative is to credit a separate account known as the Allowance for bad debts with the amount considered uncollectible.

VAT to be credited: this account depends on the nature of the business, it is credited as a means of subsidizing the tax that must be paid to the state for sales.

Debtors: here the individual accounts of the respective debtors are recorded, the summary of their account, the information provided by this account not only allows to know their movement and balance, at the end of each month the balance of the control accounts representative of credits to In favor of the company –for example, Debtors for sales and various debtors–, and the pertinent tests are carried out to verify the accuracy of the entries, on that same occasion, account statements are opened simultaneously to be sent to the debtors at the end of the previous month..

4. Officials and Employees

(Loans): Accounts with officers and employees, for loans or other advances, may be shown in the current assets group if the terms of such accounts receivable and the company's experience with them indicate that they will be collected just with ordinary current debts; otherwise they must appear separately; Example.

5. Other assets

Accounts receivable Officials and employees ……………………………….xxxxxx.

Materials Inventory: this account consists of all the materials that said company owns and may or may not have for sale in the regular course of business, that is, "all those items of tangible personal property that: 1) are held for sale.2) are in the process of production for the future sale.3) must be consumed regularly in the production of goods or services that will be available for sale.

6. Warehouse of Commodity

Premium: represents the existence of products or materials to be used in the production of a good or service, this account, as well as inventories, are presented immediately after accounts receivable because their conversion into money is only at one step away from the accounts receivable.

Merchandise Inventory: They are current assets and must reflect the existence of merchandise that belongs to the company fully and totally and neither any kind of restriction, such as merchandise in warehouse or warehouse, merchandise in transit, merchandise in the hands of sellers, merchandise on consignment, this inventory must be valued at cost. The initial inventory is made up of the contribution of merchandise made by the owner of the company at the time it is established.

7. Product warehouse

Finished: this reflects the existence of merchandise at the closing date and its valuation of great importance to obtain the cost of sales, and therefore the gross profit on sales, that is to say, the products are already ready for sale in the ordinary course of business.

Advance Payments: They are all those payments for items, supplies or services, which at the time of purchase, have been recorded as expenses and which at the end of the financial year, have not been fully consumed; therefore, an ADJUSTMENT proceeds, to record as expenses the part actually consumed and as an asset the part that has not yet been consumed, eg Insurance, interest, rentals, stationery, stationery, stamps, Etc., all paid In advance.

Insurance: prepaid current assets, we know that a policy is usually bought for a whole year or more, and that it is paid in cash in advance.

Rent: it is the account that reflects the value of the rents stipulated in times, either monthly or annual, corresponding to the premises, equipment or materials and others, which, even though they are not due, were paid in advance, increases due to debts and decreases due to having.

Advances: this account records insurance advances, other similar commissions taxes which have been paid in cash before using said asset items.

Advances to Suppliers: This account is similar in nature to the previous ones, except that the Balance sheet information is separated from them to be more detailed, reflecting the advance payments to suppliers for items supplied.

Fixed Assets: This consists of investments destined for the use of the company, this type of account has little movement, they are classified as tangible and intangible.

Land: this account is commonly used to increase and decrease land that a business has had; Although it is true that the land and buildings that are built on them are physically inseparable, it is desirable that two separate accounts be opened: one for land and the other for buildings (the same buildings depreciate and suffer deterioration, however, they do not It is the same with land).

Buildings: The building used by a business to carry out its operations can be a store, a warehouse, a warehouse or a factory; But whatever the use it may be, this account is used to record the increases and decreases in the properties that a business uses to carry out its operations.

8. Accumulated depreciation

Of buildings: Represents a counterpart for this reason, its balance is of creditor origin, it is credited to charge the depreciation of the building, and it is debited when it is sold.

Machinery and Equipment: Represents the value of all production machinery and equipment, its origin is debtor is debited when such items are purchased and credited when they are sold.

Accumulated depreciation

Machinery and equipment: Represents the portion of the cost of machinery and equipment that is considered consumed during the period, due to the effects of time, use or deterioration, account of creditor origin, as opposed to the previous account.

Transportation Equipment: This account corresponds to the value of the cost of the vehicles destined for the transport of merchandise and others, increases due to debts and decreases due to credit.

Accumulated depreciation

From transportation equipment: This account is of creditor origin because it is a counterpart, it is credited when the depreciation is charged to the previous account.

Communication Equipment: This account arises from the reason for more detailed information in the balance sheets of each item with its respective depreciation, this in particular reflects the existence and value of the communication equipment that the company owns.

Accumulated depreciation

Communication equipment: reflects the part of the cost of communication equipment that has already been charged to the depreciation expense account during its useful life.

Computer Equipment: This account reflects the computer equipment, its increases and decreases, in the course of their own exercise.

Accumulated depreciation

Of Computer Equipment: Reflects the part of the cost of the computer equipment that has been consumed from the original cost of the same.

Furniture and Equipment

From Office: This account records increases and decreases in objects such as typewriters, desks, chairs and long-lived office machines.

Accumulated depreciation

Furniture and equipment

Office: reflects the part of the cost of the aforementioned items that has been consumed from their useful life.

Intangible Assets: They are those that, as their name indicates, cannot be seen or touched because they do not have physical matter but represent values for the company, these assets must be amortized annually until they disappear from books.

Organization Expenses: They are those disbursements, more or less large and extraordinary, that a company makes when starting its business; Such economic studies, installation of systems and procedures, registration, etc., these expenses continue to benefit the company for several years.

Amortization of

Organizational expenses: It is the account where the respective part is charged to the expenses paid in advance for the purposes that the organization, this account periodically lowers the previous account.

Accounts payable: They are debts contracted by the company either for the purchase of merchandise on credit, and are covered by invoices, and must be paid within a period not exceeding one year.

Suppliers: this account is a breakdown of the previous account, this reflects the debts of the company with the people or companies that supply articles and materials in exchange for goods and services.

Creditors: the accounting of acquisitions is practiced simultaneously in the Purchase Journal, in the suppliers' accounts and in their account summaries; and the payments that are made to the creditors are recorded in the Diario de Cajas Egresos and simultaneously in this account, the mima is under a regime similar to that of the debtors' account.

VAT payable: Represents a current liability, if the company is retail in nature, it must charge this tax to the price of the item sold clearly reflected in the invoice issued to the client, in turn, it must declare said tax to the state.

Dividends payable: It is credited on the date the dividend is decreed, it represents a current liability; When registering the declaration of a dividend, some companies charge it to this account instead of debiting the Retained earnings account; In this case, it is necessary to make a closing entry at the end of the year, transferring the balance due from the dividend account to the Retained earnings account, under either method, the final result will be to reduce the Retained earnings with the value of the declared dividends.

9. Salaries and Wages

Payable: It is the account where the debts contracted by the company with its workers are recorded and must be paid in a stipulated period of time.

Rent payable: this account represents the obligation that the company has to pay the bills for renting premises, equipment and others in the time they are due.

Interest payable: They represent a liability because the company has the obligation to maintain in the debtor power the amount that it has granted in loan during the time that the interests comprise.

Tax payable: This account reflects the debt that the company has with the state for the obligations or payments due with the state or with other various government entities.

Provision to ISR: it is a balance account, which decreases with this entry, the expense of income tax.

Tax on

Payroll: these taxes constitute business expenses and are recorded as debits to expenses, up to this point the description of payroll taxes has been related to the taxes that employees are obliged to pay and withholdings on their wages; From the point of view of the employing company, such taxes are significant since as employer you have to answer for the retained values and send them to the respective government offices. In our country there is the contribution to the INCE, the IVSS by the SSO and in some Housing Policy Law cases.

Customer advances : Customers to insure future shipments of merchandise deliver an advance on account of future purchases, while the merchandise is not actually sold that advance constitutes a liability (debt) and must be recorded in this account.

Documents payable: It is the account where the documents that certify transactions such as the purchase of real estate or equipment, merchandise, and others are registered, some of these documents replace the debts in open account, as is the case of letters, payables and others. depending on who owes this account is separated.

Suppliers: it is the account that corresponds only to debts contracted with suppliers, backed by their invoices, they are considered liabilities because they are obligations that must be paid within the cycle of operations.

Institutions: this registers the transactions that may give rise to the issuance of signed bills or letters to institutions that are generally Banking.

Obligations to pay: This account includes the contractual instruments for which the payment of a certain sum of money is promised at a defined or determined future time; obligations are generally secured by liens on a current or future asset.

Capital Stock : The capital stock of a corporation is divided into an aliquot part, called shares; which must all be of equal value and will give their owners or shareholders equal rights, unless the bylaws provide otherwise; In this account, the payroll of the owners of the registered shares must be registered.

Common Stock Capital: Registers ordinary shares and represents the capital of the true owners of the company; they are the ones with deliberative power.

Preferred Share Capital: This account registers the preferred, privileged or priority shares, and they are characterized by enjoying certain privileges that are stated in their respective titles and that can be in the most varied forms, for example: a certain% of guaranteed annual dividend, fixed dividends and others.

Retained earnings: The balance of this account on the date of the initial adjustment must be compared with the balance of the Accumulated REI account on the same date; the REI debtor is a restriction on the payment of dividends, both in cash and in its shares.

Profits (losses)

From previous periods: This account records the profit or loss during the fiscal year of past periods, this account will lower or affect the capital account.

Dividends: this account records the profits that the joint stock company distributes among its shareholders, in proportion to the shares subscribed by each one of them.

Declared Dividends: The issue of declaring dividends is generally a formal act; the data in the minutes book must always indicate the agreement reached in this regard; the resolution or agreement will generally express the amount of the dividend, which may be a given percentage of the nominal value of the shares (or of the amount paid on account of the shares when they have not been fully released) or of a given amount for each share, as usual when they lack par value, determining at the same time the date on which the dividend will be effective and the date and manner of paying it, as well as who will be payable, that is, to the shareholders who are in certain date; and in the same way it must be registered in this account.

Sales: this account records the sale of merchandise at the sale price, this account is a nominal type of income that must always be paid, except in the cases in which they are charged: 1) to correct errors made in the book. 2) at the moment of "closing" at the end of the accounting period (your balance is always creditor to zero).

Income from services: These are profits obtained from the provision of a service for the sale of assets or from operations outside the normal activity of the company; the balance of this account is creditor.

Discounts: represent income obtained from discounts and bonuses for prompt payment of the company itself in its respective operations of exchange of goods and services.

Sales Discounts: They represent the income caused by the discounts granted to customers for prompt payment of the merchandise sold, their balance is debtor.

Returns and Bonuses on

Sales: the account records the value of returned goods or bonuses given or made by customers; increases by debit, the registration is of the form:

Returns ……………………………………………………..150

Cash ……………………………………………………………………..150

10. Reimbursement to a customer for return

Of merchandise

Other income: This account records profits obtained in the course of extraordinary operations of the company.

Net Purchases: This account is only used to register merchandise purchased exempt from deductions.

Purchases: it is part of the cost of sales, and therefore it is part of the profit and loss statement; represents the outlay or expense (expense) that is made and the goods acquired through said purchase, that is, the merchandise (assets), the company must recover the expense or amount at the sale price since these goods are purchased to be resold.

Discounts on purchases: Register discounts at the time of purchase or for prompt payment; however, there are two criteria, regarding the treatment of this account: 1) downgrade them from the purchasing account. 2) consider them as financial income. Supporters of the first alternative argue that it is impossible for a company to make a profit, by taking advantage of discounts on its purchases, without having made sales; and that any discount on purchases must be considered a reduction in the purchase price; the arguments of the second, are not as consistent and refer to the discounts for prompt payment are the result of the financial situation, taken advantage of by the company.

Freight on purchases: This account reflects the transportation costs of the merchandise purchased for resale.

Selling Expenses: These are expenses related to the preparation and storage of items for sale, sales promotion, expenses incurred in making sales, delivery costs and others. For the financial statements, each of these expenses is usually separated and recorded in individual accounts, but which are likewise endorsed with their respective amounts and certificates. ex:

Sales Commissions: This account is of an individual type but represents a disbursement that the company has to make as an incentive to sales personnel, resulting in an increase in ordinary sales.

11. Equipment depreciation

Transportation: Account that records the depreciation of said asset.

Salaries and Wages: Payment of sales personnel.

Insurance: related to this department.

Advertising: expenses payable for a merchandise to be sold.

Maintenance of

Vehicles: item that must be imperative in order to always have flow and circulation in the sales process.

Administration Cats: They represent the general office expenses of this department, the accounting department, personnel, and credit and collections; in the same way that the expenses of sales the same are individualized or controlled by separate accounts, for example:

Salaries and wages: Payment of personnel corresponding to the aforementioned departments.

Insurance:

Accessories:

General:

Professional fees:

Building depreciation:

Machinery and equipment depreciation:

Depreciation of Computing equipment:

Depreciation of communication equipment:

Depreciation furniture and office equipment:

Amortization of organization expenses:

Public services:

Vehicle maintenance:

Income tax: A stock company is a legal entity subject to income tax; consequently, the account code and the general ledger of the company must include this account necessary to reflect said tax; the income tax liability must be paid, generally, in the course of a few months, it should appear as a current liability

Profit and loss

(Bridge account): This account is formed due to the various items of income and expenses that are placed in a perishable way to the debit and credit of all accounts.

Extraordinary Items: This item is extraordinary due to its natural nature and that represents a forecast of sporadic events in the environment surrounding a company.

12. Conclusion

It has been corroborated that accounting in a science, having control over each of the company's transactions, allows its good compliance.

In general, I can conclude that the real accounts represent the assets, rights or contractual obligations of the company, are made up of the assets that constitute the economic sources that a business owns and that it hopes will benefit future operations.

Current assets include cash and accounts that represent values that can be converted into cash after a period of time (cash, accounts receivable, inventories).

Fixed assets which are kept more or less permanently and are acquired for business use (land, buildings, equipment, tools and fixtures, all tangible). Deferred assets such as organizational expenses are adjustments and accumulation accounts.

Liabilities are debts, all companies have liabilities, the liability that arises from the purchase of merchandise or services on credit (term) is called Accounts Payable, and the person or firm to which it is owed is called the creditor, the way in which a debt is represented, when money is obtained in loans, is recorded in an account called documents payable.

The capital is represented by the respective accounts that indicate the investment made by the owners in the business; Under the signature of a single owner, or association, the values that represent the patrimony are registered in the common social capital account and the values given as privileges or preferential in the preferred social capital account.

Sales represent income in a business this account is affected or related to others such as returns and bonuses, discounts and others.

Purchases represent disbursements made by the business to acquire tangible or intangible assets to be resold.