Accounting Basics: Definitions, Purpose, Functions

Accounting and Public Accounting Basics

What is Public Accounting (Contaduría)?

It is the professional discipline of a scientific nature that, based on a specific theory and through a process, obtains and verifies information on financial transactions conducted by economic entities.

What is Accounting?

The art of recording, classifying, and summarizing in a significant way, and in terms of money, transactions and events that are at least partly financial, and interpreting their results.

Purpose of Accounting

The purpose of accounting is to provide financial information at specific points in time or through technical records, based on classifications established by an institution. Accounts should adhere to established principles.

Stages of the Accounting Process

• Planning the accounting system for required information.
• Systematic registration of events to accumulate information.
• Classification of events to accumulate information.
• Control to verify compliance with the schedule.
• Meaningful summary of the period analyzed.

Objectives of Accounting

• To obtain financial information.
• To verify the accuracy of financial records.
• To provide information for management decision-making and resource control.
• To ensure compliance with accounting principles.

Functions of Accounting

• Historical function: Records events chronologically throughout the company's life.
• Statistical function: Provides quantitative data on economic events, offering insights into business performance and factors affecting it.
• Economic function: Studies the process of obtaining products or services.
• Financial function: Analyzes the acquisition and management of monetary resources.
• Tax function: Determines how tax regulations affect the company and its contributions to public bodies.
• Legal function: Ensures compliance with the Commercial Code and other relevant laws affecting the company.

Importance of Accounting

It is of great importance because all businesses need to track their commercial and financial activities. Accounting helps achieve greater productivity and develop assets. Furthermore, accounting information is necessary for legal compliance and status.

Efficiency vs. Effectiveness

Efficiency:

Achieving goals with the minimum of resources ('doing things right').

Effectiveness:

Achieving compliance with requirements, objectives, quantity, and time ('doing the right things').

Public Accounting History in Venezuela