Essential Accounting Principles and Mandatory Books

Differences Between the Journal and the Ledger

Journal: It is mandatory to record chronological accounting operations in a Journal.

Ledger: It is voluntary and records operations affecting specific assets. Each sheet represents an asset.

Expense vs. Payment: Practical Examples

Example 1: The phone bill for the month of October for the company Moles SA reached €100. Payment will be made in one month. Moles SA used the phone in October and shall record it at this time; however, this will not be paid until after one month, which is when the payment (cash outflow) will be counted.

Example 2: Almenar Company Ltd. contracted the services of a lawyer and paid the bill in cash, which amounts to €1,000. In this case, the company has obtained the services of a lawyer, representing an expense for the company; in addition, they paid at that moment.

Income vs. Collection: Practical Example

Aniol Company Ltd. performs a transportation service for a client, although this is not their main activity. The bill amounts to €500. The customer pays in 30 days. When the company performs the service, it earns an income of €500, which it records in its accounting. When the money is received, it processes the collection.

Trial Balance and Mercantile Law

Purpose of the Trial Balance: To check that all registered debits are quantitatively equal to the credits recorded.

Mercantile Law: A set of laws that regulate the activity of traders.

Purpose of the Minutes: To keep a record of decisions taken by the boards and special committees, as well as other collective bodies of the society.

Main and Auxiliary Accounting Books

Difference between Main and Auxiliary Books: The main books are necessary to maintain the accounts of the company. Auxiliary books are not mandatory, but they serve to complete the information contained in the main books.

Three Required Accounting Books: The Journal, the Book of Inventories and Annual Accounts, and the Minutes Book.

Why is the Ledger Voluntary?

Although no legislation regulates the obligation to register transactions in a Ledger, it is considered a necessary book to maintain the accounting of any company.

Books Required by the Code of Commerce

The Book of Inventories and Financial Statements, and the Journal.

Classification Criteria

A book is mandatory when specific legislation states that it is; other books that the company chooses to use are considered voluntary.