VIRGINIA MORENA MONTERO

In Spain, the General Accounting Plan is explained as the document that covers the accounting
principles. The latter are the combination of instructions to guide the accounts of a company in the
correct way. In these guidelines is included both net worth and the remaining economic elements of a
company.

There are six Accounting Principles and their main goal is that the financial reports are:
- Relevant
- Ascertainable
- Reliable
- Understandable
- Quantifiable
- Obtainable

Definitely, accounting from any company has to record and organize all accounting documents, that is
why everyone is able to obtain a solid and global vision from a company’s financial condition.

What are the Accounting Principles.

Let’s revise all accounting principles that we can find in the accounting of a company.

Accruals
This one standardises the record of revenues and expenditures. According to this rule both must be
registered in the right comercial exchange or service realization moment. In other words, import due
or service sold is added to the accounting even if it is charged six months later.
Tha same happens with expenses control, they are included when they are produced, not when the
payment transfer is made.

Uniformity
When a business installs an evaluation criteria or method, it should not vary. Although there is an
exception that conditions may vary. However, it is not that they can not be changed but the conditions
must be applied in the same way in all procedures.
Otherwise, an incident may occur which prevents the process from taking place in the same way. As a
result, it should be included in the annual report. In addition to registering the annual accounts, an
explanation must be added with the reasons for this modification in the process.
Good judgement
This principle’s root is to not to exaggerate the financial information. Due to the reason in case of
having to choose between two values indicating the cost, the one with the lowest value must be
chosen. Veracity of the company indicated in the accounts is the target, uncertainty moments
included. Although this does not prevent it from being used to make false estimations. On the other
hand, this care principle is indeed applied in the profit accounting.

No compensation
A prohibition is entailed in this principle. In other words, it prohibits compensation of some accounts
with others, but in addition, it forces each account to be valued separately; unless there is another rule
which establishes otherwise. This means that we can not compensate an asset item with a liability
item, nor can earning be compensated against expenses.

Relative significance
Name speaks for itself, this principle explains that not all the guidelines have the same importance.
Which means, some of the accounting policies can be omitted.
For instance, those events that are not important to our company. Furthermore , that different level of
significance of the rules mentioned, in any conflict between accounting policies; the one which
represents in the best way the account statement, assets, and company outcomes prevails.

Company in operation
It is based on the presumption of continuity of the company over the years, otherwise these
estimations could not be made. A good example would be the loss of value of a property owned by
the company. On the contrary, if the company knows that it is going to be liquidated within a period
of time, other rules and principles would be applied. In other words, principle of operation has not to
have as a main goal the net value of the company to proceed to its liquidation.