Core Concepts of Production Management and Financial Accounting

Production Management Fundamentals

The production department is responsible for planning, organizing, managing, and controlling the transformation of inputs into products. All decisions must take into account several key factors:

• Productive Capacity: The maximum amount that can be produced with available resources.
• Product Demand: The quantity of products to be manufactured is based on business demand.
• Production System Design: Determines the production approach to adapt flexibly to environmental changes.
• Economic Environment: External economic situations that are related to the business.

Production planning is structured from a long-term strategic plan into short-term actions. The stages include a sales forecast, a master production plan, and a production program. This process must be complemented by an operational control system and an economic control system.

Understanding Company Financial Statements

Accounting is the economic science that studies a company's assets, based on standards and scientific principles that underpin the business's economy.

The Objective of Accounting

The primary objective of accounting is to provide economic information to different types and levels of users within the business environment:

• Managers: To have sufficient information to make decisions.
• Owners or Shareholders: To verify that their interests are well protected.
• Workers: Since the company's results affect their job continuity.
• Creditors: To receive guarantees that the company can meet its payment obligations.

Core Financial Concepts

• Business Patrimony: The complete set of rights and obligations a business holds.
• Assets: Reflect the economic structure of the enterprise, representing its total investments or the use of its funds.
• Liabilities & Equity: Reflect the company's financial structure, representing the origin of its financing.

General Accounting and Annual Accounts

General accounting is mandatory for all companies, regardless of their legal form. They must keep records and prepare Annual Accounts, which are financial statements that report the company's results, its assets, and its financial position.

The Memory Statement

The Memory is a comprehensive, explanatory document that provides detailed content about the other annual accounts. The broader its comments, the more useful it is to its recipients. It includes information on:

• Company activity
• Distribution of results
• Valuation rules
• Fixed assets
• Social capital
• Debts

The Balance Sheet

The Balance Sheet is a document that shows a company's financial position at a specific moment. It reflects the company's assets, liabilities, and equity at a single point in time and must be presented in a balanced format.

Assets: Company Rights and Possessions

This section incorporates all of the company's possessions and rights.

• Fixed Assets: Includes items like computers, land, transportation, buildings, and accumulated depreciation (as a negative value).
• Current Assets:
  • Inventories: Stock of goods.
  • Receivables: Customer accounts, notes receivable.
  • Cash and Equivalents: Bank accounts.

Liabilities and Equity: Company Obligations

This section records the company's obligations (debts) and its net worth (equity).

• Equity and Non-Current Liabilities: Includes capital, reserves, and long-term loans and debts.
• Current Liabilities: Includes suppliers, creditors, and short-term debts.

The fundamental accounting equation dictates that Total Assets must equal Total Liabilities plus Equity.