Understanding Heritage Business and Accounting Principles

Posted on Dec 6, 2024 in Mathematics

Heritage Business: Is the set of assets, rights, and obligations that a company has duly valorized in connection with the purpose to which they are intended.

Calculation Result from the Variation of Equity: If we compare the PN of a company in two different periods of time, we see that it has changed. If the company evolves so that the CP increases, it is said to have obtained benefits; if the value of PN decreases, it is said that the company has had losses during this period.

RESULTS (Profit or Loss of a Period) = PN (End of Period) – PN (Beginning of the Period).

Mass Heritage: The set of assets is classified in groups or items that account for assets and liabilities homogeneous according to the following criteria: active elements are grouped according to greater or lesser availability and liabilities according to the degree of liquidity.

Masses of Assets ยท ASSETS:

  • Non-current Assets: It is formed by those elements of heritage linked to the company for over one year. It consists of the following masses:
    • Intangible Assets: Formed by the assets that the company needs to produce but do not have corporeal materiality.
    • Tangible Assets: Formed by all tangible and corporeal property of the company that this company allocates its productive activity during a series of periods.
    • Long-term Investments: Composed of any investment in financial assets or long-term capital investments that the company intends to keep for a long period of time.
    • Investment Property: Made for those investing in real estate not involved in the activities of the company.
  • Current Assets: It consists of those elements that are in constant rotation, i.e., which are changed several times in one fiscal year. It comprises:
    • Stocks: Made for those materials used in the preparation of the product or for merchandise that the company sells ready-made.
    • Receivables: Represents loans and collection rights of the company operations that are already accomplished and have resources that allow effective collection within a relatively short time.
    • Available Cash: Liquid formed by elements of the company and, therefore, have immediate availability.

The Double-Entry System: A method that involves simultaneously recording in at least two accounts the variation that occurs in the equity accounting due to transactions (everything that comes in and everything that goes out).

  • Outline of the Accounting Cycle:
    • 1. Initial Balance Sheet
    • 2. Opening the Book on Settlement Day
    • 3. Daily Paper
    • 4. Ledger
    • 5. Balance Testing and End of Year Inventory
    • 6. Corrections to End Strike
    • 7. Balance of Final Check
    • 8. Final Balance Sheet


The Overall Plan of Accounting and Normalization: The financial information has to be interpreted and verified by everyone who has access to it, so we must unify, i.e., there must be common operational rules for all users of accounting, to facilitate the interpretation, analysis, and comparison of external accounting reports of enterprises. Different countries can achieve this homogenization through the creation of so-called general accounting plans.

The new accounting system is organized into five parts:

  • Conceptual Framework (required)
  • Rules for Registration and Assessment for SMEs (mandatory)
  • Annual Accounts (required)
  • Chart of Accounts (voluntary)
  • Definitions and Accounting Relationships (voluntary)

Accounting Principles: The basic principles that govern the registration and evaluation of the integral elements of the financial statements are six:

  • 1. Business Operation: The financial statements are prepared on the basis that the activity of the company will continue in the foreseeable future, so that the application of the regulations was not designed to determine the value of settlement.
  • 2. Date of Fact or Accrual: Involves the accounting records of business transactions and other events, taking the actual flow that originates and not the current currency.
  • 3. Uniformity: Sets the obligation to maintain over time a criterion adopted by the company within the permitted alternatives. Can only be altered if you change the assumptions that led to its adoption.
  • 4. Caution: This involves the inclusion of a reasonable degree of caution in the estimates made under conditions of uncertainty of events and circumstances. Specifically, it indicates the obligation to count only the benefits to the end of the year, while the risk of loss arising from the exercise or another earlier must be counted as soon as known.
  • 5. Non-compensation: Prohibits the compensation of the games of assets with liabilities, and expenses with income; in addition, the elements of financial statements must be evaluated separately.
  • 6. Relative Importance: Allows non-strict application of any accounting principle when the quantitative and qualitative impact is of little relevance, such as the grouping of items by nature or function when the importance of their amount is barely significant.