General Accounting Plan and Business Balance Sheets

The General Accounting Plan (PGC)

3.2—The General Accounting Plan (PGC) is a statute that regulates various aspects of business accounting and is mandatory for all companies, regardless of their legal form and size.

Mandatory Annual Accounts and Financial Statements

3.3—The annual accounts: Financial statements are to be produced compulsorily by incorporated companies at the end of each fiscal year in order to provide information on their financial and economic situation.

They are part of the annual accounts; every company is required to include four statements: balance sheet, profit and loss account, the statement of changes in net assets, and the notes (memory).

Essential Books of Account for Businesses

3.4—The books of account: For good accountancy, it is necessary to rely on a series of books. Businesses are required to keep a book of inventories and annual accounts and a journal, as well as other books used on a voluntary basis, such as the general ledger.

• Journal Entry: Used to record chronologically all economic transactions that take place in the company. Registration must be done daily.
• Ledgers and Financial Statements: Provide very complete information on the situation of the company. It opens with the initial balance sheet of the company at the beginning of the year and ends with the annual accounts.
• Ledger: This is voluntary, but almost all companies maintain it for its utility. It is the set of all accounts opened by the company at any given time.

The Balance Sheet and Asset Management

4.—The balance

Understanding the Balance Sheet Structure

4.1—Balance: A document that represents the assets of the company at a determined time by grouping its elements around the three main pools of assets: assets, net assets, and liabilities.

The balance has a static sense. It reflects the state of the company at the precise moment in which it is made. To order individual items, follow the criteria of liquidity and enforceability: the asset is ordered from lowest to highest liquidity, while the liability is ordered from low to high enforceability (chargeability).

Types of Stock and Balance Sheets

4.2—Types of Stock: Depending on when they are prepared:

• Initial balance sheet: Prepared at the beginning of the year and serves to check the status of the company at the beginning of the financial period, in order to compare with future situations.
• Year-end balance sheet: Prepared on the last day of the year. It is the most important of all.
• Trial balances (or amounts and balances): These are made between the beginning and the end of the year. Their purpose is twofold: to verify that the data are being recorded correctly and to track the status of the company by comparing balance sheets with others.