Unit I

GENERALITIES OF THE ACCOUNTING, THE

ACCOUNT, THE ACCOUNT PLAN AND THE
ACCOUNTING RECORDS.
Financial accounting overview
Basic theory of financial accounting

•Basic concepts and elements

•Generally Accepted Accounting Principles
(GAAP)
•Basic considerations
•Fundamental accounting assumptions
Concepts and basic elements of
Financial Accounting
 Concepts

• Accounting entity • Prices

• Business going • Estimates
• Economical measurement • Relative importance
• Period • Substance more than form
• Measurement in terms of • financial statements
money
• Accumulation
Accounting entity
A specific company is identified in its components of
the financial statements, as a legal entity independent
of the shareholders that comprise it.
Business going
The companies will continue their operations
indefinitely
Economical measurement
The measurement of the economic resources and
economic obligations of the company, of the activity
carried out by the company
Period
Specific periods shorter than the life of the
company, facilitate comparability
Measurement in terms of
money
Resources and obligations in monetary terms, a
unit of measure that is identified in the Financial
Statements.
Accumulation
The measurement of assets and liabilities, effect
of accumulating monetary units, economic
events.
Prices
It is measured based on the exchange prices of
economic resources and economic obligations.
Estimates
Distributions that are made based on rough
estimates
Financial statement
They are the product of the accounting
process, a volume of data on economic
aspects is accumulated, analyzed and
reported
Basic elements of Financial Accounting
Core items:
• Assets
• Passives
• Net worth
• Income
• Costs
• Expenses
• Net profit or loss.
Generally Accepted Accounting Principles
(GAAP)
• Essentials, general treatment for the recognition and
determination of events.
• General of operation, guide the selection and
presentation of financial accounting.
• Detailed, are the open principles that implement the
above
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Basic Considerations of Financial Accounting
• Prudence: some degree of caution in making the judgments
to make the estimates.
• Essence about form: the technical base prevails over the
legal one.
• Materiality or relative importance: The information is
material and therefore relevant, if its omission or erroneous
presentation could influence the preparation of the financial
statements
Fundamental accounting assumptions of
Financial Accounting
• Fair presentation: requires faithful representation of the
effects of transactions, other events and conditions.
• Going Business Hypothesis
• Consistency: It is important within the accounting of the
same company.
• Accrual or accrual accounting basis: Resources and
economic obligations are made regardless of whether cash
collections or payments are made.
Difference between the terms: public
accounting and bookkeeping
• Refers to discipline by a professional accountant.
• The bookkeeper is limited in his management
area, solely and exclusively to the record of
economic operations.
Professional services offered by the public
accountant
• Independent audit of financial statements
• Tax audit
• Internal audit
• Special exams
• Investigation
• Teaching
• Dependent professional.
Accounting relationship with other disciplines
Legal aspect of accounting and the mandatory use of a
technical reference framework
• Commercial Code
• Law of the superintendency of commercial obligations
• Law regulating the practice of accounting
• Tax code and its regulations
• Income tax law and its regulations
• Law of tax on the transfer of movable property and provision of
services and its regulations
International Financial Reporting Standard for small and
medium-sized enterprises (IFRS for SMEs)
• Not listed on the stock exchange
• Has no obligation to publish financial statements
• It is a single standard that is composed of 35 sections.
Public Accounting and Financial Accounting of
the XXI Century
• It becomes an inescapable and urgent need, because
it is a dynamic discipline, constantly changing. And
according to the regulatory law it gives public faith of
the presentation of the financial statements