Introduction
Introduction The world is becoming easier every day, companies operate in a global environment that demands high competitiveness. We are in the era of communications. In which information is the most vital element for any business. The accounting information is decisive for decision making. Accounting emerges, in this context, as an indispensable necessity, since it is the business language through which the results, the financial position of an entity and its changes are expressed.
The world is becoming more and more simplified every day, companies operate in a global environment that demands high competitiveness. We are in the era of communications. In which information is the most vital element for any business. The accounting information is decisive for decision making. Accounting emerges, in this context, as an indispensable necessity, since it is the business language through which the results, the financial position of an entity and its changes are expressed.
Through time accounting has followed a process of adaptation to the different changes in the environment, in such a way that from its origins Through time accounting has followed a process of adaptation to the different changes in the environment, in such a way that from its origins - in which it was eminently empirical - until today has been defined from different perspectives, schools and doctrines; generating debates and conceptual discussions regarding whether it is art or science or technique or discipline. With positions that are sometimes irreconcilable; However, they are a reflection of the importance it has had on societies throughout history.
Definition of Accounting
One of the classic definitions was promulgated in 1940, by the terminology committee of the American Institute of Certified Public Accountant (AICPA) Institute of Public Accountants of the United States of America, according to which accounting is "the art of recording, classifying and summarizing of in a significant way and in monetary terms, the operations and the facts (transactions and events -or events) that are at least partly of a financial nature, as well as interpreting their results ”.
In our current environment, accounting has also had to transform its conception from being a tool to comply with tax obligations or art or science or technique or discipline to become an information system, a strategic ally of the employer. An information system “is a set of interrelated elements that collects data, processes it and converts it into information, which it stores and subsequently distributes to its users. Like any system, it also includes a feedback loop that is a control mechanism ”. "Accounting is an information system, since it captures, processes, stores and distributes a particular type of data, financial information, vital for correct decision-making in the company."Accounting is defined as an accounting system since its function is to communicate the economic events of an entity.
The globalized world demands having understandable, relevant, reliable and comparable accounting information. For this reason, financial statements are prepared so that they are useful to their users in making decisions.
"Accounting is an information system that records and classifies financial transactions carried out by an economic entity, in quantitative and monetary terms, turning them into financial statements that help users make decisions."
The accounting cycle
Accounting is made up of a series of stages that are carried out repeatedly in order to transform information about the transactions or operations of an entity into Financial Statements for different users, which we know as the Accounting Cycle. Accounting is made up of a series of stages that are carried out repeatedly in order to transform information about the transactions or operations of an entity into Financial Statements for different users, which we know as the Accounting Cycle.
The stages of the accounting cycle are: The stages of the accounting cycle are:
- Compilation of documented information: All the accounting vouchers or documents issued or received such as invoices, tax credit vouchers, forms, remittance vouchers, voughchers, debit or credit or remittance notes, tax returns, receipts, promissory notes, letters are gathered change, remain and others. The information is ordered correlatively to facilitate its subsequent analysis and registration. Information Analysis: The documentation is analyzed to determine the double effect that the operations have on the accounting structure, according to the principle of double entry. 2. Information Analysis: The documentation is analyzed to determine the double effect that the operations have on the accounting structure, according to the double entry principle. 3. Registration of operations in the Daily Book:The double effect that the operations cause on the accounting structure is recorded through charges and credits in items, entries or annotations in the Daily Book. Registration of operations in the Daily Book: The double effect that the operations cause on the accounting structure is recorded through charges and credits in items, entries or annotations in the Daily Book. Classification of items in the General Ledger: The charges and credits of the journal entries are classified in their corresponding accounts in a General Ledger. Each account has an assigned code that identifies it. Verification and Adjustments Balance: G / L accounts are listed with their corresponding balance to verify if the annotation and classification process has been correctly carried out. Then the accounts are updated,so that they reflect the correct amount in the Balance Sheet and the income, costs or expenses are recorded in the period in which they are incurred. The Adjusted Trial Balance is then compiled. At this stage, a Worksheet can be used alternatively.Preparation of Financial Statements: Starting from the Trial Balance, the following are prepared:
- The Income Statement The Balance Sheet The Statement of Changes in Capital The Statement of Cash Flows Notes to the Financial Statements Management Reports
Types of Accounting
The Financial Statements will be prepared based on the relevance of their content for users. Due to this fact, accounting is classified into two types: (a) financial and (b) Financial Statements will be prepared based on the relevance of their content for users. Due to this fact, accounting is classified into two types: (a) financial and (b) administrative.
Financial accounting Financial accounting is an information system aimed at external users, such as investors, lenders, suppliers and commercial creditors, customers, the government and its public bodies, which applies local laws and International Accounting Standards. Whose base is generally historical. According to the International Accounting Standards, “Many companies around the world prepare and present financial statements for external users” (quote taken from the foreword to the “Conceptual Framework…” of the International Accounting Standards).
Administrative accounting is an information system aimed at internal users, such as managers and all those who make decisions in a company, whose nature is optional and also uses a predetermined basis.
Historical Synopsis of Accounting
Accounting was born approximately 5,000 years ago, since man had a need to know the value of his possessions, debts and income. There are traces of account records kept by the Greeks, Chinese, Egyptians, and Babylonians. In the Old Testament we find references that allow us to infer that there was some way of accounting. Among them we can mention the following.
(a) "Abraham was very rich in cattle, silver and gold… and… gave to Melchizedek, King of Salem, tithes of everything" (Genesis 13.2; 14.18-20 NLT), the calculation of the offering implied some form of to record.
(b) "They were all counted six hundred three thousand five hundred fifty" (Numbers 1.46 RVA), the census implied some form of accounting.
The previous references show us that accounting already existed since ancient times. However, the monk Luca da Borgo Paccioli (Figure 1.4), a friend of Leonardo da Vinci, was the first to describe - in his work Summa de arithmetica, geometria, proportioni et proportionali a, published in 1494 - the Double Game, beginning in which are based t accounting systems to our time. For that reason he is considered the Father of Accounting.
Some authors 1 refer to the history of accounting, dividing it into these periods (Figure 1.5):
- Ancient Age: With man three essential elements are fulfilled for accounting activity: (1) Men are constituted in economic units, based on the division of labor; (2) They communicate with writing and numbering; (3) A unit is a measure of value.
Accounting was practiced in Egypt, Mesopotamia, Greece, and Rome. In Rome the germ of double entry appeared, the "adversary" (Cash) and the "codex" (Current accounts) were the most used books. The Paetelia Papiria law, 325 BC is the oldest law that derived in rights or obligations of the accounting entries. The Roman accountants were slaves and commoners who were grouped in Colleges.
- Middle Ages: From 476 until the fall of Constantinople to the Ottomans. In the Romanesque period, accounting, as a commercial instrument, continued its informative function. Muslim merchants practiced accounting. Likewise, the monks in the monasteries and the scribes of the feudal lords and kings. As in Venice, a commercial center that lived linked to the East through Constantinople. And finally, the Italian republics, the most important commercial centers, began to make changes to the “Roman” game, which in the 15th century was already similar to current practice. Modern Age: From 1453 to the French Revolution: Begins to disclose the accounting discipline with the appearance of the printing press. Benedetto Centrugli Rangeo is the pioneer of Accounting texts. Luca Paccioli's Summa appears.The conquest of America expanded the new technique to the colonies. Starting in the 17th century, a caste of independent professionals emerged in the Mercantile Centers whose function is to verify accounting information. Contemporary Age: From 1789 to today. From the 19th century on, accounting has undergone major changes in form and substance:
to. So:
- The single Major Journal arises, the centralizing system, mechanization and accounting electronics. A new technique begins: Costs. The state affects the legal-accounting requirements and the exercise of the profession.
b. Background:
i. Various schools are established, depending on their conception of the accounts:
- PersonalistValueAbstractLegalPositivist
ii. Begin the study of Principles tending to solve problems related to prices and the unit of measurement, concepts such as:
- Depreciation Amortization Reserves Funds
iii. The teaching system is rationalized
iv. Ethics is the fundamental basis of the exercise of the accounting profession.
In our country, public accounting emerged in 1915, with the creation of the first accounting school attached to the General Francisco Menéndez Institute. This fact favored the emergence of private institutions that were dedicated to accounting education, which awarded the titles of Treasury Accountant, Commercial Expert, Bookkeeper, Accountant and others. However, accounting became important as of 1930, as a result of the deficient audit carried out by an English firm in the Gold Mines of "El Divisadero". Given this situation, the first Association of Accountants is created, which is currently called the Corporation of Accountants. Ten years later, the first National Council of Accountants is constituted, whose objective is to authorize those who request it, after passing an exam,the exercise of the profession through the appointment of Certified Public Accountant (CPC), protected in the decree of Law of In our country, public accounting emerged in 1915, with the creation of the first accounting school annexed to the General Francisco Menéndez Institute. This fact favored the emergence of private institutions that were dedicated to accounting education, which awarded the titles of Treasury Accountant, Commercial Expert, Bookkeeper, Accountant and others. However, accounting became important as of 1930, as a result of the deficient audit carried out by an English firm in the Gold Mines of "El Divisadero". Given this situation, the first Association of Accountants is created, which is currently called the Corporation of Accountants. Ten years later, the first National Council of Accountants is constituted,whose objective is to authorize those who request it, after passing an exam, the exercise of the profession through the appointment of a Certified Public Accountant (CPC), protected by the decree of the Law on the Exercise of the Public Accountant's Functions (Official Gazette, October 15, 1940).
In the nineties, the different accountants unions unified their efforts and carried out various national conventions, from which, first, the Standards of In the nineties, the different accountants unions unified their efforts and carried out several national conventions, from which arise, first, the Financial Accounting Standards (NCF), later the International ontability Standards -NIC's- of the extinct IASC (in transition to the IASB's NIRFs) are adopted as we will explain in the next chapter and, finally, the Salvadoran Institute of Public Accountants (ISCP) was constituted on October 31, 1997 - from the merger of the College of Academic Public Accountants, the Association of Public Accountants and the College of Public Accountants -,as an entity of Salvadoran nationality, with an indefinite duration, with a non-profit, apolitical and secular nature, domiciled in San Salvador; whose objectives are to raise the intellectual, cultural and moral level of its partners, protect and defend the accounting profession and promote the application of technical standards for the professional practice of its members, among others.
In the year 2000, there was already a great advance in the legal field: important reforms were implemented to the Commercial Code, the Law of the Commercial Registry, and the Law of the Superintendence of Commercial Obligations, the Law Regulating the Exercise of Accounting appeared. and the Tax Code.
The Salvadoran Institute of Public Accountants, the Corporation of Accountants and some firms in our country work with international entities in the dissemination of the IASC's International Accounting Standards in transition to the IASB's NIRF's –in the new legal framework–, to unify the study programs and the exercise of the profession in Central America and the rest of the countries. The relevance that has been given to the exercise of the accounting profession in the 21st century is remarkable, which poses great challenges, such as those we define in this direction:
Questions.
- Why is accounting important? Why is it claimed that accounting is an information system? What are the differences between financial accounting and management accounting? What is the accounting cycle? What are the stages of the accounting cycle? When did accounting arise and in what year did the first notions of the principle of double entry appear? Explain each of the four periods of accounting history How accounting began in our country? What changes have local accountants made in the last years? Mark with an “x” to indicate if the statement pertains to Financial Accounting or Administrative Accounting.
Comply with local laws: CF____ CA_____
Provides information restricted to internal users CF____ CA_____
It complies with IAS CF____ CA_____
It is linked to economics and statistics CF____ CA_____
It is eminently historical CF____ CA_____
Its character is optional CF____ CA_____
Its character is mandatory CF____ CA_____
Uses projections into the future CF____ CA_____
Provides information to external users CF____ CA_____
ANNEXED:
Fundamental Principles of Accountant Ethics according to IFAC.
The International Federation of Accountants (IFAC) states as fundamental principles of Professional Ethics, the following:
Integrity. The Accountant must be honest and direct in the execution of his professional work.
Objectivity. The Accountant must be fair and not let prejudice or the influence of others nullify his objectivity.
Professional Competence and Sufficient Care.- Every Accountant must possess knowledge, skill and experience, in order to apply them with reasonable care and diligence, must request advice and assistance when required to ensure that the professional services they provide are satisfactorily performed and must refuse to perform them. when you do not have the necessary technical qualification for it.
Confidential Nature.- Accountants must respect the confidential nature of the information they obtain and not reveal it without authorization unless there is a legal or professional obligation that compels them.
Professional behavior. The Accountant must act consistently, taking care of the good reputation of the profession and refrain from any behavior that could discredit a person or the profession.
Technical Standards. The Accountant shall carry out his professional services in accordance with the relevant professional techniques and standards. It will have the obligation to carefully and skillfully execute the requirements of the client or employer insofar as they are compatible with the requirements of integrity, independence and objectivity, and it must comply with the Accounting and Auditing standards established internationally.
