Business

Accounting: Basics… What are they?

The building blocks are accounts. Accounting is the smallest unit from which it is possible to build an accounting system. Which will form the basis of the company information system.

Adequate accounting will allow you to draw up, for example, financial statements that represent the epilog, the summary!

Whenever there is an administrative Event. And registration is required. The account will acquire its maximum importance.

What does it mean to manage the accounts?

Managing to account means making accounting entries. That is, drawing up the books that allow the company to record all management facts.

It is essential that it is held every day. So that events that affect the life of the company. Do not escape, furthermore this is a regulatory obligation. So it is the law that requires the keeping of accounts in a chronological way.

How is the accounting of a company kept?

The accounts are kept as a personal diary, through the registers required by law: the journal and the ledger.

Both are chronological books, in which you need to write down your business events day by day, event by event.

The books of accounts

The diary requires that you use event-by-event accounts. Just as indicated by the word “newspaper”. It acquires as in a newspaper. The function of commenting on what has happened in the life of the company. Operation by operation, respecting what has happened over time.

The ledger instead has its focus on the accounts. The maestro is the representation of what happened, account by account, in the life of the company. Then the focus shifts from the operation in its entirety to the accounts. That has been used during the various accounting entries

.

Every event in the life of the company is then reviewed under two visions.

The first, that of the diary, for the incident; the second, that of the ledger, based on the accounts. Used in each accounting entry and, therefore, to trace what happened in each event.

Who keeps the bills?

The accounting is kept by people. Who physically carry out the registrations in the company accounts with the aid of specific software.

Identifying these people becomes strategic for the business owner. Recently, with the advent of e-invoicing, a lot is changing.

Probably that keeping accounts will increasingly become an operation that can be performed directly by the software. The intervention of people will become a mere control!

Many innovative startups are pushing this aspect.

The human element, in my humble opinion, will remain a fundamental element above all. Because the synthesis of all accounting will define the financial statements, which remain the main corporate information tool.

Financial changes, what are they?

Financial changes are the ways. In which it is possible to make accounting entries in financial accounts. Financial variations concern the extent of financial accounts which are very specific for all business activities.

Accounts and changes represent the basis of the company information system.

Financial changes relate to specific measures. Double-entry accounts must be entered respecting the nature of the account, financial ones concern:

  • cash changes (cash, postal and bank checks)
  • changes in debts
  • credit changes
  • changes in accruals, provisions for risks and provisions for charges

In the business economics notes of students. It is usual to find a cross in which the nature of the changes is written. Because the financial accounts move both up and down.

More specifically, the changes can be trivially represented. As follows (for the moment I omit the changes concerning accruals, provisions for risks, and provisions for charges).

 Each act or fact of management will be characterized by a financial variation. Which may be active or passive, due to the economic variation to which it is connected.

Variations – cycles and equilibria

The changes we are talking about are strong. Linked to the financial cycle or financial equilibrium.

If absurdly all the negotiations. If companies carry out on a daily basis. Were to take place immediately (without payment extensions). Then there would be a coincidence between the economic cycle and the financial cycle without the need for discrepancies.

Clearly, if the economic and financial cycles were coincident. Then it would be easier to pursue financial equilibrium. But for completely natural reasons. just think of the financing of investments. For innovative startups that require great financial efforts. In the initial stages of the life of the company. enterprise) all this remains mere theory!

Very often one thinks. That they are related exclusively to the exchange of cash, money, money. In truth, it is not! It also records when moving accounts related to credits and debts! Receivables and payables that may concern all the stakeholders involved: employees, the State, banks, suppliers, and customers.

You can also be a debtor to customers. When you receive sums on account or be creditors towards suppliers for the same reason.

In the same way, it is possible to be a debtor towards employees. When there is a delay in the payment. Of what is due or to be a creditor towards employees for advances on the paycheck.

What matters is to understand, due to the fact that has happened. Which accounts need to be moved (Economic and financial). And make the necessary changes, remembering that financial changes represent a measure of economic ones.

Financial accounts

The financial accounts are:

the cash desk and all the accounts connected to it (bank current account, post office current account, check box, etc.)

all accounts open to receivables (for example receivables from customers, tax credits, advances to suppliers, etc.)

all accounts open to debts. (for example debts to suppliers, tax debts, advances from customers, debts to banks, shareholder loans, etc.).

As mentioned, all financial accounts, unlike the economic ones and work both in input and output. For the moment I am not yet talking about giving and taking. In order to offer a vision that is as simplistic and functional. As possible to the objective of explaining the basic elements of accounting in a very banal way.

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