Key Accounting and International Trade Terms

Key Accounting Terms

• Entries: Journal analysis of the effects of a transaction on the accounts, usually accompanied by an explanation of the transaction.
• Ledger: Single accounts kept updated by posting. Each is recorded with one debit and one credit.
• Assets: Resources controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.
• Liabilities: Obligations of the enterprise arising from past events, expected to result in an outflow from the enterprise of resources embodying economic benefits.
• Equity: What is left of the assets after liabilities are deducted. Capital or owner's interest, withdrawals.
• Expenses: Amounts that have been paid or will be paid for costs that have been incurred to earn revenue.

IFRS and Accounting Cycle

• IFRS: International Financial Reporting Standards are principles-based standards, interpretations, and the framework adopted by the International Accounting Standards Board. This organization represents over 143 accountancy boards from 104 countries and is developing a common set of accounting standards to be used worldwide.
• Account: A record of financial transactions over time used to collect and store similar information.
• Accounting Cycle: The cyclical nature of accounting. It divides time into periods to analyze the performance of the financial situation of the company:
  1. Inventory opening
  2. Activity transaction
  3. Closing

International Trade

Benefits of Trade

Trade allows greater mobility of factors of production between countries:

1. Countries specialize in products where they have higher efficiency.
2. Imports are used when domestic production is not enough.
3. It enables deliveries of products that exceed consumption (exports).

Incoterms

International Commercial Terms are international rules accepted by governments, legal authorities, and practitioners worldwide for the interpretation of the most commonly used terms in international trade. They aim to reduce or remove uncertainties arising from differing interpretations.

1. Clauses for all transport modes
2. Clauses for transport by sea and inland waterway (FAS, FOB, CFR, CIF)

Incoterm Groups:

• E: Departure
• F: Main carriage unpaid
• C: Main carriage paid
• D: Arrival

Key Documents in International Trade

• Purchase Order: A commercial document issued by the buyer to the seller, indicating types, quantities, and agreed prices for products or services.
• Invoice: A commercial document issued by the seller to the buyer, relating to a sale transaction and indicating the products, quantities, and agreed prices for products or services the seller has provided the buyer.
• Pro-forma Invoice: An invoice prepared by the seller before the shipment of goods, informing the buyer of the kinds and quantities of goods to be sent, their value, and important specifications.
• Bill of Lading (B/L): A shipping contract that serves as proof that the goods were received by the shipper and determines the responsibilities of the contractors.
• Air Waybill (AWB): Proof of the existence of a contract of carriage, detailing the scope and responsibility for the operation performed, and identifying the parties and goods.
• Sea Waybill (SWB): It does not convey the title to the goods and cannot be negotiated. It is demonstrative.
• Carriage of Goods by Road (CMR): Similar to an AWB but for road transport.
• Single Administrative Document (SAD): A customs form developed by the EU to control the import and export of goods arriving at and departing from the EU.
• Certificate of Origin (CO): A document attesting that goods are obtained, produced, or manufactured in a particular country.
• Insurance Policy: A contract between the insurer and the insured that determines the claims which the insurer is legally required to pay. It is designed to meet specific needs.
• Phytosanitary Certificate: Indicates that consignments of plants, plant products, or other regulated articles meet specific phytosanitary import requirements.
• Quarantine: Compulsory isolation, typically to contain the spread of something considered dangerous, often disease.

Payment Methods

• Bill of Exchange: A written order by the maker instructing an importer or its agent to pay a specific amount of money at a specific time.
• Cheque: An order for payment from a bank account. The drawer writes details of the payee, ordering their bank (drawee) to pay that person the stated amount.
• Promissory Note: An unconditional promise in writing made by one person to another, engaging to pay on demand to the payee a specific sum of money.
• Open Account: The exporter dispatches the goods and at the same time sends an invoice.