Find out what accounting is for, the types that exist, and whether you are required to keep it.
We detail which accounting books are mandatory.
For some business owners, accounting is an unproductive expense, motivated by an imposed obligation, which they would not do if they could. It is more than likely that these business philippines phone lookup owners will have all kinds of problems derived from improper use , and in many cases from poor management.
Accounting is a key tool for decision-making, both internally and externally (lenders and investors), and therefore must reflect a true image of society .
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1)What is accounting?
Accounting is the recording in accounting entries of all operations carried out in the company, following a chronological order and applying mandatory rules that are included in the General Accounting Plan.
The Accounting Plan states that accounting must be free of errors and reflect a true image of the company.
Article 25.1 of the Commercial Code establishes that entrepreneurs, regardless of their form, individual or corporate, have the obligation to keep orderly accounting , appropriate to the activity of their company and that allows a chronological follow-up of all their operations, as well as the periodic preparation of balance sheets and inventories .
2) Which accounting books are mandatory?
The Commercial Code requires keeping two accounting books:
The journal . It chronologically records the amount of all transactions carried out in the development of business activity.
The inventory book and annual accounts . The inventory book must be opened with the company's initial detailed balance sheet (first accounting statement), transcribing at least quarterly, with sums and balances, the trial balances (second accounting statement). In addition, the year-end inventory (third accounting statement) and the annual accounts (last accounting statement) must be included annually.
The annual accounts must include :
balance,
profit and loss account,
statements of changes in equity,
cash flow statements
and memory.
The Commercial Code requires keeping a journal and an inventory and annual accounts book.
3)Types of accounting
Accounting is a key tool for organizations, as it allows them to obtain internal and external information about society.
Financial accounting provides information for both external and internal use. It is mandatory for corporations to keep it up to date and, among other things, it helps investors and lenders to decide whether to invest or grant credit to a company. It must be kept as determined in the General Accounting Plan .
Analytical or cost accounting is not mandatory, but it is carried out by almost all large companies and many SMEs. This type of accounting facilitates greater control of the business and facilitates decision-making at an internal level. Its purpose is to study how the company's costs and income are distributed in order to obtain internal information for decision-making.
Start of marked textTWEET IT! Find out in a practical and simple way which accounting books are required.End of marked text
4)Do all entrepreneurs have to keep accounting records?
Depending on the legal personality of the entrepreneur and the type of income estimate, in the case of natural persons (self-employed), tax legislation establishes different obligations:
Taxpayers of Corporate Tax
Commercial companies that pay corporate tax must keep official accounts, in accordance with the General Accounting Plan in force at any given time, in accordance with the provisions of art. 133.1 of the Corporate Tax Law . Their annual accounts will serve as a basis for determining the taxable base for corporate tax.
Self-employed workers, civil companies, communities, who pay income tax
You can choose between:
Direct assessment . For individuals with a turnover of more than 600 thousand euros in the previous year, or for those who have voluntarily opted for this regime.
Simplified direct estimate . For individuals whose figure, in the previous year, did not exceed 600 thousand euros. Under this regime, it is not required to keep official accounts, although the profit of the business must be determined.
Objective estimate (modules). For individuals who carry out any activity whose heading is included in the taxation by Objective Estimate .
For associations and, in general, for non-profit entities, the presentation of accounting books and annual accounts is not strictly obligatory. Unless the statutes of the entity define it as such, or if it is a public utility entity. However, it is advisable to give a solid image to third parties, members and associates.