Summary of Theory of Accounting - Basic Rules in 2 pages

The main purpose of fiscal accounting is to determine the company's results in order to calculate tax on profits. Throughout the year, purchases, sales and other accounting movements are being recorded. Once the accounting movements have been registered we can print several reports.

The main accounting reports are:

- Journal - provides information on the daily accounting movements of the company's activity

- Ledger (Account statement) - provides information about company accounts. An account statement for each account. In each account we have information on a topic. Example: Cash, bank deposits, customers, suppliers, goods, etc.

- Balance sheet - provides summary information about the balance of each account. Usually monthly.

- Profit and Loss Statement - provides information about the company's results

- Balance Sheet - provides information on the assets, liabilities and net worth of the company. In the Accounting are registered where the funds of the company were applied and what was its origin.

Application of Funds	Origin of Funds
Properties Equipments Goods Customer Debt Bank deposits Cash	Share capital Results Reservations Bank loans Dedt to Suppliers

In the Balance Sheet, Liabilities and Net Assets tell us the origin of the funds invested in the company. The Asset tells us where the company's funds were invested.

Balance
Asset (Application of Funds)	Liabilities and Net Assets (Origin of Funds)
Investments Tangibles (buildings and machines) Intangibles (trademarks and patents) Inventories Raw materials, commodities And finished products Bills to receive Customers Net financial means Bank deposits Cashier	Equity Shareholders Reservations Results Bills to pay Providers Banks state State

In a simplified way we can state that:

In active is represented everything that belongs to our company, as well as everything that is owed to our company.

In the Liabilities are represented the debts of our company, these debts are usually to banks, suppliers, state and other companies.

In the Net Position is represented the capital that the partners placed in the company added to the results that our company has had over the years.

In accordance with the rules for moving accounts:

- Assets - Increases by the movements to debt and decreases by the movements on credit.

- Liabilities - Decreases by movements to debt and increases by movements on credit.

- Net Situation - Decreases due to movements to debt and increases by movements in credit.

- Income - Increase by movements in credits

- Expenses - Increase by movements of debits

	Debit	Credit
Active	Increases	Decreases
Passive	Decreases	Increases
Net Income	Decreases	Increases
Expenses	Increases
Recipes		Increases

According to the logic of accounting:

- The Active, which is positioned on the left side, increases by the flow rate, which is also positioned on the left side.

- The Liabilities, which positions on the right side, increase by credit, which also positions on the right side.


  - The Net Position, which is positioned on the right side, increases by credit, which is also positioned on the right side.
 

Under the double entry rule, in any accounting movement, the value of the total debited shall be equal to the total amount written off.

Consequently, according to the fundamental accounting equation in the Balance Sheet the Asset is equal to the sum of the Liabilities with the Net Situation.

decreba.com