Accounts and items in the Financial statements

Table of Contents

1. Introduction
Fixed working capital Intangibles
Deferred current
2. Development
3. Estimation of Accounts
4. Officers and Employees
5. Other assets
6. Material Storage
7. Product warehouse
8. Accumulated depreciation
Accumulated depreciation
Accumulated depreciation
Amortization of
9. Wages and Salaries
Taxes on
10. Reimbursement to a customer for a return
11. Equipment depreciation
12. Conclusion
13. Bibliography

1. Introduction

For the preparation of the most complete and accurate financial statements, it is necessary to know a little about the accounts or items that comprise them. With this purpose, this work is developed; which must contain the way of registering the daily commercial activity, in terms of money; purchases and sales of merchandise, credits, debts, and others. Record accounts are classified into real and nominal.

In the real accounts, the assets, liabilities, and capital of the company are treated.

In the nominal accounts, the items of income and expenses are treated.

In the assets:

Fixed working capital Intangibles

Box Land Rights

Petty Cash Buildings Capital Gains

Accounts receivable Machinery Patents.

Equipment Inventories

In the Passives:

Deferred current

Accounts payable Advance payments.

Bills payable

Taxes to pay

In the Capital: -. Social capital

-. Common Share Capital

-. Share Capital Preferred

2. Development

Accounts are generally divided into the following classes:

Accounts “Real” Accounts comprise the assets, liabilities, and equity of a trade, and since they are an integral part of the balance sheet, they are called Balance Sheet accounts.

The “nominal” accounts record the merchant’s income and expenses and how they are used to formulate the Profit and Loss statement.

Assets: they are resources or economic goods, owned by a business, with which benefits are obtained; the assets of a business vary according to the nature of the company; a small company can have a single vehicle and a modest office; while a large department store or factory may have buildings, machinery and equipment, land, furniture, accounts receivable, and others.

Cash: Accountants use the word cash to designate coins, bills, checks, bank drafts, and money deposited in banks, not including postage stamps, cash loan vouchers, or postdated checks.

Cash: Available current assets, represents the cash that the company maintains to make its payments frequently; increases by the debit when it is decided to increase the fixed petty cash fund and decreases by the credit when it is decided to eliminate the fund.

Petty Cash: minor expenses that do not require the preparation of a check are made through petty cash; the amount of the fixed fund, and the maximum amount of payment for petty cash depend on the nature of the business, its volume of operations, and the frequency with which petty cash is used; petty cash can be kept in a small safe; Fixed petty cash fund is understood to be the amount with which this account is created and the amount to which we must carry after reimbursement.

Bank: represents the money that is in a banking institution as deposits, represents an available current asset, increases when it is deposited, that is, due to debits, and decreases when checks are issued against the bank.

Temporary Investments: Many companies invest, from time to time, idle funds in realizable values, for temporary investments, protection purposes, sinking fund provisions, and other objects, in these cases, the accounting system must see to the effect of the investments they have been registered, in detail, accurately and punctually and they are protected from unauthorized manipulation; represent available current assets increases by debits and decreases by credits.

Investments in shares: they are investments that are made in order to value said shares, to be able to be resold after a while, thus recovering the invested capital and obtaining profits that in some cases represent considerable amounts.

Accounts Payable: Demandable Current Assets, include amounts receivable in an account open to debtors for business operations, and accounts receivable from stockholders, officers, or employees.

Customers: this account is created at the time of a sale on credit, registered as customer debt represented with their respective invoices, this account is created in order to keep a detailed record of external and internal accounts receivable.

3. Estimation of Accounts

Uncollectibles: There is no way to tell in advance which customer accounts will be collectible and which will be worthless; therefore, it is not possible to credit any particular customer’s account to reflect a total estimate of credit losses over the course of the year; it is also not possible to credit the Accounts Receivable control account in the general ledger; the only alternative is to credit a separate account called the Allowance for Uncollectible Accounts with the amount deemed uncollectible.

VAT to be credited: this account depends on the nature of the business, it is credited as a means of subsidizing the tax that must be paid to the state for sales.

Debtors: here the individual accounts of the respective debtors are registered, the summary of their account, and the information provided by this account not only allows us to know their movement and balance, but at the end of each month the balance of the control accounts representative of credits to in favor of the company -for example, debtors for sales and miscellaneous debtors-, and the pertinent tests are made to verify the accuracy of the entries, on that same occasion the account statements are simultaneously opened to be sent to the debtors at the end of the previous month.

4. Officers and Employees

(Loans): Accounts with officials and employees, for loans or other advances, may be shown in the group of current assets if the terms of such accounts receivable and the company’s experience with them indicate that they will be collected fairly with ordinary current debts; otherwise, they must appear separately; Example.

5. Other assets

Accounts receivable Officers and employees……………………………….xxxxxx.

Materials Inventory: this account consists of all the materials that said the company owns and may or may not have for sale in the regular course of business, that is, the “total items of tangible personal property that: 1) are held for the sale.2) are in the process of production for future sale.3) have to be consumed currently in the production of goods or services that are going to be available for sale.

6. Material Storage

Premium: represents the existence of products or materials that have to be used in the production of a good or a service, this account, like inventories, is presented immediately after accounts receivable because its conversion into money is only available. One more step away from the accounts receivable.

Merchandise Inventory: These are current assets and must reflect the existence of merchandise that belongs fully and totally to the company and not any kind of restriction, such as merchandise in warehouse or warehouse, merchandise in transit, merchandise in the hands of vendors, consignment goods, this inventory must be valued at cost. The initial inventory is made up of the contribution of merchandise made by the owner of the company at the time of incorporation.

7. Product warehouse

Finished: this reflects the existence of merchandise on the closing date and its valuation of great importance to obtain the cost of sales, and therefore the gross profit in sales, that is, in which the products are already ready for sale in the ordinary course of business.

Advance Payments: These are all those payments for articles, supplies, or services, which at the time of purchase, have been recorded as expenses and that at the end of the fiscal year, have not been fully consumed; Therefore, ADJUSTMENT proceeds, to record the part actually consumed as an expense and the part that has not yet been consumed as an asset, eg, insurance, interest, rent, stationery, stationery, stamps, etc., all paid In advance.

Insurance: prepaid current assets, we know that a policy is usually bought for a whole year or more and that it is paid in advance.

Rent: it is the account that reflects the value of the rents stipulated in times either monthly or annual corresponding to the premises, equipment, or materials and others, which even without being due were paid in advance, increased by the debit, and decreases by the credit.

Advances: this account records insurance advances, taxes, commissions, and other similar items that have been paid in cash before using said asset items.

Advances to Suppliers: This account is similar in nature to the previous ones, only that the Balance information is separated from them to be more detailed, it reflects the advance payments to suppliers for items supplied.

Fixed Assets: It is formed by the investments destined for the use of the company, this type of account has little movement, they are classified as tangible and intangible.

Land: this account is commonly used for the increase and decrease in the land that a business has had; Although it is true that the land and buildings that are built on it are inseparable, physically speaking, it is desirable that two separate accounts be opened: one for land and another for buildings (the same buildings depreciate and suffer deterioration, on the other hand, they do not the same happens with the lands).

Buildings: The building used by a business to carry out its operations can be a store, a warehouse, a warehouse or a factory; but whatever the use it is given, this account is used to record the increases and decreases in the real estate that a business uses to carry out its operations.

8. Accumulated depreciation

For buildings: It represents a counterpart for that reason, its balance is of credit origin, it is credited to charge the depreciation of the building, and it is debited when it is sold.

Machinery and Equipment: Represents the value of the set of machinery and production equipment, its origin is debtor, it is debited when said items are acquired and credited when they are sold.

Accumulated depreciation

Of machinery and equipment: Represents the portion of the cost of machinery and equipment that is considered consumed during the period, due to the effects of the passage of time, use, or deterioration, account of creditor origin in contrast to the previous account.

Transport Equipment: This account corresponds to the value of the cost of vehicles for the transport of merchandise and others, which increases by debits and decreases by credits.

Accumulated depreciation

Transportation equipment: This account is of credit origin because it is in counterpart, it is credited when depreciation is charged to the previous account.

Communication Equipment: This account arises from the reason for more detailed information in the balance statements for each item with its respective depreciation, this in particular reflects the existence and value of the communication equipment that the company owns.

Accumulated depreciation

Communication equipment: reflects the part of the cost of communication equipment that has already been charged to the depreciation expense account during its useful life.

Computer Equipment: This account reflects the computer equipment, and its increases, and decreases, in the course of their own exercise.

Accumulated depreciation

Computer Equipment: Reflects the part of the cost of computer equipment that has been consumed from its original cost.

Furniture and Equipment

Office: This account records increases and decreases in items such as typewriters, desks, chairs, and long-life office machines.

Accumulated depreciation

Furniture and equipment

Office – Reflects the portion of the cost of the aforementioned items that have been consumed out of their useful life.

Intangible Assets: They are those that, as their name indicates, cannot be seen or touched because they do not have physical material, but they represent values for the company. These assets must be amortized annually until they disappear from the books.

Organization Expenses: These are those disbursements, more or less large and extraordinary that a company makes when starting its business; such as economic studies, installation of systems and procedures, registration, etc., these expenses continue to benefit the company for several years.

Amortization of

Organization expenses: It is the account where the respective part of the expenses paid in advance for the purposes of the organization is charged. This account periodically lowers the previous account.

9. Wages and Salaries

Payable: It is the account where the debts contracted by the company with its workers are recorded and must be paid within a stipulated period of time.

Rent payable: this account represents the company’s obligation to pay the rental invoices for premises, equipment, and others when they are due.

Interest payable: They represent a liability because the company has the obligation to keep in debtor power the amount that has been granted as a loan during the time that interest is included.

Tax payable: This account reflects the debt that the company has with the state for the obligations or payments due with the state or with other various government entities.

ISR provision: it is a balanced account, which decreases with this entry, the expense of income tax.

Taxes on

Payroll: these taxes constitute business expenses and are recorded as debits on account of expenses, up to this point the description of payroll taxes has been related to the taxes that employees are obliged to pay and withholdings on their salaries; From the point of view of the employing company, such taxes are significant since, as an employer, they have to answer for the values withheld and send them to the respective government offices. In our country there is a contribution to INCE, the IVSS by the SSO, and in some cases the Housing Policy Law.

Customer advances: Customers to ensure future shipments of merchandise provide an advance on account of future purchases, while the merchandise is not actually sold, this advance constitutes a liability (debt) and must be settled in this account.

Documents payable: It is the account where the documents that certify transactions such as the purchase of real estate or equipment, merchandise, and others are registered. Some of these documents replace the debts in an open account, such as letters, promissory notes, and others. depending on who owes this account is separated.

Suppliers: it is the account that corresponds only to the debts contracted with the suppliers, supported by their invoices, they are considered liabilities because they are obligations that must be paid within the operations cycle.

Institutions: this records the transactions that may give rise to the issuance of promissory notes or bills signed to institutions that are generally Banks.

Obligations payable: This account includes the contractual instruments for which the payment of a certain sum of money is promised in a defined or determined future time; Obligations are generally secured by liens on a current or future asset.

Social Capital: The social capital of a public company is divided into aliquot parts, called shares; which must all be of equal value and will give their owners or shareholders equal rights, unless the bylaws provide otherwise; The payroll of the owners of registered shares must be registered in this account.

Common Stock Capital: Registers the ordinary shares and represents the capital of the true owners of the company; because they are the ones that have deliberative power.

Preferred Capital Stock: This account registers the preferred, privileged, or priority shares, and are characterized by enjoying certain privileges that are stated in their respective titles and that can be in the most varied forms, for example, a certain % of guaranteed annual dividend, fixed dividends, and others.

Retained earnings: The balance of this account at the date of the initial adjustment must be compared with the balance of the Accumulated REI account on the same date; the debtor REI is a restriction on the payment of dividends, both in cash and in its shares.

Profits (losses)

From previous periods: This account records the profit or loss during the fiscal year of past periods, this account will reduce or affect the capital account.

Dividends: This account records the profits that the anonymous company distributes among its shareholders, in proportion to the shares subscribed by each of them.

Declared Dividends: The issue of declaring dividends is generally a formal act; the data in the minute book must always state the agreement taken in this regard; The resolution or agreement will generally express the amount of the dividend, which can be a given percentage of the nominal value of the shares (or the amount paid on account of the shares when they have not been fully released) or a given amount for each share, as is usual when they have no nominal value, determining at the same time the date on which the dividend will be effective and the date and manner of paying it, as well as who will be payable, that is, to the shareholders that will be paid in certain date; and in the same way it must be registered in this account.

Sales: This account records the sale of merchandise at the sale price, this account is of a nominal type of income that must always be paid, except for those cases in which the following are charged: 1) to correct errors made in the book. 2) at the time of “closing” at the end of the accounting period (its balance is always credited to zero).

Income from services: These are profits obtained by providing a service from the sale of assets or by operations unrelated to the normal activity of the company; the balance of this account is credited.

Discounts: represent income obtained from discounts and bonuses for early payment of the company itself in its respective operations of exchange of goods and services.

Sales Discounts: Represent the income generated by the discounts granted to customers for prompt payment of the merchandise sold, its balance is indebted.

Returns and Discounts on

Sales: the account records the value of returned goods or bonuses given or made by customers; increases by the debit, the record is of the form:

Returns……………………………………………………..150

Cash……………………………………………………………………..150

10. Reimbursement to a customer for a return

of merchandise

Other income: This account records profits obtained in the course of extraordinary operations of the company.

Net Purchases: This account is only used to record merchandise purchased exempt from deductions.

Purchases: it is part of the cost of sales, and therefore it is part of the profit and loss statement; represents the disbursement or expense (expense) that is made and the goods acquired through said purchase, that is, the merchandise (assets), the company must recover the expense or amount in the sale price since these merchandises is acquired to be resold.

Discounts on purchases: Register discounts at the time of purchase or for prompt payment; however, there are two criteria regarding the treatment of this account: 1) reduce them from the purchase account. 2) consider them as financial income. Supporters of the first alternative argue that it is impossible for a company to obtain profits by taking advantage of discounts on its purchases, without having made sales; and that any discount on purchases is to be considered a reduction in the purchase price; the arguments of the second are not as consistent and refer to the fact that prompt payment discounts are the result of the financial situation, taken advantage of by the company.

Freight on purchases: This account reflects the transportation costs of merchandise purchased for resale.

Sales Expenses: These are the expenses related to the preparation and storage of items for sale, sales promotion, expenses incurred when making sales, delivery expenses, and others. For the financial statements, each of these expenses is usually separated and recorded in an individual account, but they are also registered with their respective amounts and certificates. ex:

Sales Commissions: This account is of an individual type but it represents a disbursement that the company has to make as an incentive to sales personnel, obtaining as a result an increase in ordinary sales.

11. Equipment depreciation

Transportation: Account that records the depreciation of the said asset.

Wages and Salaries: Payment of sales personnel.

Insurance: related to this department.

Advertising: expenses required for merchandise to be sold.

Maintenance of

Vehicles: items that must be imperative in order to always have flow and circulation in the sales process.

Administration Expenses: They represent the general office expenses of this department, the accounting department, personnel and credit, and collections; In the same way as sales expenses, they are individualized or controlled by separate accounts, for example:

Wages and salaries: Payment of the personnel corresponding to the aforementioned departments.

Insurance :

Accessories :

General :

Professional fees :

Building Depreciation:

Machinery and equipment depreciation:

Computer equipment depreciation:

Depreciation of communication equipment:

Office furniture and equipment depreciation:

Amortization of organization expenses:

Public services :

Vehicle maintenance :

Income tax: A stock company constitutes a legal person subject to income tax; consequently, the code of accounts and the general ledger of the company must include this account necessary to reflect said tax; the income tax liability must be paid, generally within a few months, it should appear as a current liability

Profit and loss

(Bridge account): This account is formed because of the various items of income and expenses that are placed in the debit and credit of all accounts.

Extraordinary Items: This item is extraordinary due to its nature and represents a forecast of sporadic events in the environment surrounding a company.

12. Conclusion

It has been possible to corroborate that accounting is a science, having control over each of the company’s transactions allows good compliance with it.

In general, I can conclude that the real accounts represent the assets, rights, or contractual obligations of the company, they are made up of the assets that constitute the economic sources that a business has and that are expected to benefit future operations.

Current assets include cash and accounts that represent values that can be converted into cash over time (cash, accounts receivable, inventories).

Fixed assets that are held more or less permanently and which are acquired for business use (land, buildings, equipment, tools, and fixtures, all tangible). Deferred assets such as organization expenses are adjustments and accruals accounts.

Liabilities are debts, all companies have liabilities, the liability that arises from the purchase of merchandise or services on credit (term) is called Accounts Payable, and the person or firm to which it is owed is called creditor, the way in which a debt is represented, when money is borrowed, it is recorded in an account called notes payable.

The capital is represented by the respective accounts that indicate the investment made by the owners in the business; under the signature of a single owner, or association, the values that represent the patrimony are registered in the common social capital account and the values given as privileges or preferred in the preferred social capital account.

Sales represent the income in a business, this account is affected or related to others such as returns and allowances, discounts, and others.

Purchases represent expenditures made by the business to acquire tangible or intangible assets for resale.