Essential Finance and Accounting Terms for Business
Business Structures and Key Roles
- Sole Proprietorship
- A business owned by a single individual who has no partners or shareholders.
- Partnership
- A company owned by two or more persons who are personally responsible for all business liabilities and debts.
- Corporation (Sociedad Anónima)
- A company owned by shareholders, who have limited liability for the company’s debts.
- Agency Problem
- A conflict of interest between a company’s owners (shareholders) and its managers.
- Stakeholder
- Anyone with a financial interest
Corporate Structure and Financial Statement Fundamentals
The Corporation: Definition and Objectives
A corporation is an ingenious device for creating individual profit without individual responsibility.
Defining a Corporation
A corporation is:
- A virtual or fictitious entity.
- Created by the state through the process of incorporation.
- An entity with its own rights and liabilities: it can enter into contracts, buy, sell, or own property, bring lawsuits, and pay taxes.
Corporate Power and Control
Corporations:
- Are no longer merely instruments of the state.
- Are state-
Analyzing the Balance Sheet and Income Statement Components
Understanding Core Financial Statements
The Balance Sheet: Definition and Components
The Balance Sheet is the primary accounting document that reflects the financial position of a company at a specific time. It adheres to the fundamental accounting equation.
Defining Net Worth (Heritage)
Net Worth (or Heritage) is defined as the set of goods, rights, and obligations of the company at any given time. This definition contains three key elements:
- Assets (Goods/Properties): The set of properties owned by
Essential Income Tax Definitions and Key Concepts
Core Income Tax Terminology and Definitions
Fundamental Definitions (Section 2)
Person (Section 2(31))
As per Section 2(31) of the Income Tax Act, a “Person” includes:
- An Individual.
- A Hindu Undivided Family (HUF).
- A Company.
- A Firm.
- An Association of Persons (AOP) or Body of Individuals (BOI).
- A Local Authority.
- Any artificial juridical person not covered above.
Assessee
An Assessee is a person by whom any tax or any other sum of money is payable under the Income Tax Act. This term also includes a person against
Read MoreFabris Accounting: Journal Entries and Year-End Closing Procedures
Fabris Daily Journal Entries
7. Bank Interest Income (December 28)
On December 28, the bank notifies the entry of 164 € into our bank account for interest income, after an 18% tax deduction.
| 164.00 | 572 | Bank Account (EUR) | to | Other Financial Income (1) | 769 | 200.00 |
| 36.00 | 473 | Tax Withholdings | (164 / 0.82) | |||
| (200 * 0.18) |
(1) Calculation: X – 0.18 X = 164. X = gross amount of interest = 200 euros.
8. Purchase of Tiles and Returnable Packaging (December 31)
On December 31, FABRIS purchases 4,000 PETRASA tiles at 10 €
Read MorePGC 2007: Marco Conceptual y Requisitos de Cuentas Anuales
Estructura y Fundamentos del PGC 2007
1. Marco Conceptual
El Marco Conceptual establece los principios y conceptos contables fundamentales cuya aplicación conduce, de forma lógico-deductiva, al reconocimiento y medición de los elementos de las Cuentas Anuales. Se divide en las siguientes etapas:
Objetivo de la Información Contable
La información debe ser comprensible y útil para los usuarios en la toma de decisiones económicas, y debe mostrar la imagen fiel del patrimonio, la situación financiera
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