Key Accounting Principles and Practices

Posted on Dec 15, 2024 in Economy

The realization principle aims at not anticipating outcomes, even if there is a high degree of assurance that the transaction will be finalized at a future date.

  • Heritage expenditure decreased, however, it is required to generate revenues in the period.
  • Losses are decreases in equity assets which are wholly or partially extinguished or contract obligations without getting anything in return.
  • Earnings can materialize in asset increases or decreases in liabilities.
  • The accounts are an ordered set of notes relating to the same concept, i.e., of the same nature.
  • The recording technique of double-entry bookkeeping, based on economic principles, manages to equalize charges with credits.
  • The accounting principle of equity dictates that the information contained in financial statements must be neutral, i.e., free from bias or prejudice.
  • In a period of rising prices, the FIFO system generates a cost undervaluation of company sales.
  • To demonstrate the effects of fiscal debts, VAT tax will be considered content in both ballots and invoices.
  • The balance sheet is an inventory of assets, rights, and obligations of the company at a given date.
  • The company is a contract in which two or more persons agree to provide something in common with a view to distribute among themselves the benefits derived therefrom.
  • The financial statements relate to specific economic entities, which are different from the owner or owners thereof.
  • The principle of fairness suggests that impartiality should inform economic events that have occurred, avoiding at all times that they can be distorted.
  • According to the principle of duality, the total economic resources of an entity shall always equal the total of existing rights over them.
  • Increase asset accounts and records to be reduced.
  • A ledger is a record that classifies and groups the transactions by using accounts.
  • In the case of VAT, taxable matters are sales of movable tangible property, services, and imports.
  • The sale of used motor vehicles is an exemption from value-added tax.
  • In the journal, business operations that are performed will be recorded in chronological order, day by day.
  • The accounts are the systematic grouping of transactions involving the same subject or person, under an appropriate heading.
  • The principle of duality is evident in economic equity assets with debt and equity, an equality that should always exist.
  • The asset accounts are debited by the increases and credited for decreases, taking a debit balance.
  • The accrual is reflected in the accounts receivable assets and liabilities payable.
  • The account obligations of partners are complementary assets and accounts of the capital account, and records the amount contributed by such a society.
  • Invoices are documents that support the purchase and sale transaction; VAT is separated from the value of the goods or service.
  • The remainder is the difference in favor of a VAT enterprise product greater than the VAT Credit Debit.
  • In the general ledger, transactions are recorded once they have gone through the journal; its purpose is to classify and group transactions by their nature in the respective accounts.
  • The Chart of Accounts is the systematic organization of all accounts used by the accounting system of a company; this will include the account codes, their names, and the groups they belong to.
  • The accounting entity principle establishes that the financial statements relate to specific economic entities, which are different from the owner or owners thereof.
  • The corporation is a capital company, where what matters most is the capital, regardless of personal identity, in fundamental ways from those who acquire title to this.
  • You must register increases in assets, decreases in liabilities, and declines in equity.
  • The credit balance occurs when the credits to an account are greater than their debits; examples where this occurs are the accounts of liabilities and profit.
  • The FIFO method of cost recovery of goods sold applies the value of goods leaving the space, giving priority to the oldest costs.
  • In a limited liability company, a forced account is an account of the heritage item of the same nature as the capital account, only that as a negative, as it represents capital that does not exist. Its balance is indebted.
  • The assets correspond to the obligations of the enterprise or the owners. Represents the net ownership of these in the company.
  • The VAT credit relates to tax leaning in shopping bills.
  • The book points out that accounting currency is measured in monetary terms, which allows heterogeneous components to reduce all to a common denominator.
  • In companies, the responsibility of members is limited; the value of the contributions is represented by an instrument called action.
  • Liabilities consist of all financial obligations of a company; these obligations or debts may be accounts payable, taxes payable, etc.
  • When an increasing amount of an account is active, it must be recorded as a debit.
  • Profit and loss accounts are designed to record changes in capital produced by utilities and/or expenses.
  • The physical inventory method has the limitation that you can only know the cost of sales at the balance sheet date or inventory, which does not provide timely information for decision-making.
  • The method of valuing stocks known as FIFO is to consider that the first units purchased are the first to be sold.
  • The balance is the report that will determine the assets resulting from the difference at a given date between assets and liabilities of a company.
  • The rate of value added is 19% and applies to all sales to be made, whether this operation is extended by a ballot or an invoice.
  • In the journal, business operations running the dealer will be recorded in chronological order, day by day, stating in detail the nature and circumstances of each.
  • To write down a number having an account is called pay or credit.