Essential Accounting Principles and Financial Statements

Trial Balance and Account Groups

Trial Balance (Balance of Evidence): This is a statement made periodically, usually at the end of each month, to check that all charges are equal to the total debits and credits recorded in each period.

• Groups of accounts: Assets, liabilities, capital, and results.
• Balance sheet accounts: Asset accounts, liability accounts, and capital accounts.
• Result accounts: These track the profit or loss that the company obtains through the economic exercise.

Income and Expense Accounts

Main statements of income: Income accounts, costs, and expenses.

• Income accounts: These represent the income earned by the entity as a sequence of normal business operations of the company.
• Expense accounts: These represent the cost of sales performed as normal business operations of the company.
• Spending accounts: These represent the expenditures an economic entity must make to carry out its normal operations.

Accounting Policies and Vouchers

Accounting Policy: This is a document used for the registration of a transaction or operation in all its details.

Policy types: Entry, exit, and daily.

• Income Policy: Transactions are logged representing revenues and cash inflows.
• Output Policy: Annotations from operations that signify cash outflows.
• Daily Policy: Used to record the operations performed that involve cash inflows or outflows of cash.

Primary Accounting Ledgers

Ledgers: The journal, the ledger, and the balance.

• The Journal: It is the main accounting record in any accounting system that records all daily operations.
• The Ledger: A summary of all transactions that appear in the journal in order to know their movements.
• Balance: It is a financial report that reflects the location of the assets of an entity at a given time.

Basic Financial Statements

Basic financial statements: Income statement, balance sheet, statement of changes in financial position, and variation in capital.

• Income Statement: Shows the profit or loss that the company earned in a specific period, demonstrating the efficiency or deficiency of the company.
• Balance Sheet: It presents the valued property and rights available to the company.
• Statement of Changes in Financial Position: It shows the resources generated by the operation as well as major changes in sources of information.
• Statement of Changes in Equity: Shows changes in the participation of the owners of the company during a specified period.

Catalog of Accounts and Classification

Catalog of Accounts: A detailed and ranked list of the concepts that form the assets.

• Numerical: A set of incremental numbers for each account; group accounts must be created according to the structure of financing.
• Decimal: Combines the accounts of a company using digit numbers for each group.
• Alphabetical: Letters of the alphabet are used to attach to each account, forming groups of accounts in accordance with the structure of the financial statement.