What is accounting and what is it for?

What is the accounting of a company? What is accounting for?  The lack of rigor in its elaboration can not only entail the imposition of sanctions by the Treasury, but it can also have very negative consequences for people who must answer for its authenticity.

What is contability?

Through accounting , each and every one of the economic operations carried out by an entity is recorded , in order to be able to obtain all that information ordered and grouped.

Accounting consists of recording all economic operations in order to know where everything the company has come from, where it has gone and how much remains.

In one way or another, all those who “manage” funds can keep their accounts: a person or group of people, a community of owners, an association, etc.

And they can do it the way they want.

Adding or subtracting the items they consider appropriate, with the frequency they deem appropriate and using the means they deem appropriate.

Regardless of this, when we talk about a business we will refer to accounting as it is included in the Commercial Code.

Business accounting is known as Double Entry Accounting

RECOMMENDED READING : How is the accounting of a company? (In practice) .

What is accounting for?

Accounting consists of recording all the economic movements of a company in order to prepare its financial statements .

These reports contain the information that has been written down, but in an orderly manner and with a specific structure.

What they show is a “photograph” of the economic and financial situation of the entity, which basically has two objectives :

  1. Offer a faithful image of the state of the business to people interested in it, both internally and externally, such as partners, creditor banks, finance, investors, etc.
  2. Serve as the basis for calculating the corresponding taxes. In other words, anyone can show that their company is doing very well, but only the financial statements will say whether that is true or not.

In view of the two functions it performs, it seems obvious that the importance of accounting is that it be true and truthful .

The lack of rigor in its elaboration can not only entail the imposition of sanctions by the Treasury, but it can also have very negative consequences for people who must answer for its authenticity.

The importance of accounting

Accounting, balances, benefits, accounting entries, accounting management, tax base, balances, investments, deductions, corporation tax, expenses, invoice records …

When you are entering the business world, you begin to notice that words that have always been quite foreign to you begin to appear in many conversations and documents.

You hear them, you read them, and little by little you start using them, but you don’t feel safe because you do n’t quite understand exactly what their meaning is .

Many belong to the field of taxes, others are economic terms in general and a large part is the vocabulary of accounting.

And it is inevitable.

Accounting is part of the business world and, whether you understand it or not, it will be there.

That is why I think that the notions that can be acquired from it, whether they are few or many, simpler or more complex, will always add up and it will never hurt to know them.

Who is required to keep the accounting?

All companies are required to keep accounting except in the following cases :

  • In the case of individuals covered by the module system: They only have the obligation to keep the invoices in chronological order.
  • In the case of natural persons under the simplified direct estimation scheme: instead they must keep a record book of sales and income, a record book of purchases and expenses and a record book of investment assets.

In other words, the following companies are required to keep accounts:

  • Legal persons: For example, limited companies, corporations, cooperatives, etc.
  • Natural persons (self-employed) , if they are in the normal direct estimation regime.

In practice it happens that:

  1. There are few business natural persons that are in the normal Direct Estimation Regime, because it is mandatory in cases where the volume of business reaches certain amounts. And what usually happens is that for these amounts, most entrepreneurs have chosen to form a company.
  2. On the other hand, there are many natural persons who, without being obliged to do so, do carry it because they want to, even if they do not have to present it at any time.

What is needed to carry out the accounting management of a company?

The correct accounting management of a company will need 3 pillars:

  • An accounting program
  • The documents payment
  • professional who manages them

Which professional should do business accounting?

A project for a work must be carried out by a certified technician, a public deed can only be done by a notary, but this does not happen with accounting.

In a company, anyone can keep accounting : it is irrelevant whether they are part of it or not, and also whether they have any type of degree or studies.

This does not mean that it is extremely convenient for the owner to be familiar with the essential terminology and operation of accounting.

That is to say that, even if you do not dedicate yourself to “mechanizing” data, it is very important that you have some notions (even if they are general, since accounting reflects the economic situation of the company and the data it offers are essential to make decisions properly.

RECOMMENDED READING : 7 reasons why delegating your accounting to an expert is a good idea .

The accounting program

We are in the 21st century and accounting is carried out with computer programs … it is unthinkable otherwise.

There are two types of accounting programs:

  • The ones that you install directly on your computer
  • Those in the cloud

The latter are the latest, cloud accounting programs have a number of  advantages over the former to traditional accounting programs. These 2 should be highlighted:

  • You only need an internet connection to work from anywhere and with any device.
  • Cloud technology is much more secure. You don’t worry about backups, updates and space problems on your computer.

An accounting software in the cloud will allow a single click, get a balance to a specific date, knowing what you must leave a customer or see what is the benefit of current activity, among many other things.

 

Online accounting services in the cloud allow you to gain efficiency in the recording of accounting events and the preparation of professional reports in a much simpler and faster way.

These programs can automate different types of information: billing, connection to banks, inventory control, payroll, assets …

RECOMMENDED READING : Why should you keep the accounting of your online business? .

The most leading cloud accounting programs such as anfix have eliminated the need to manually account for things like expense tickets or reconcile with your bank .

Automating the management of your business will substantially reduce the possibility of errors in the registration process and the need for a professional who has to enter the information by hand.

Choosing the most appropriate software for your needs is a task that needs reflection.

For this reason, anfix offers you a free trial for 15 days with all its operational functions, without restrictions of any kind. You only need an email address. ACTIVATE THE FREE TRIAL HERE

Summary

  • Accounting consists of recording the economic operations of the company in order to obtain the financial statements that will be used for decision making or tax settlement.
  • All companies are required to carry it except for natural persons (self-employed) covered by the Simplified Direct Estimation Scheme or the Modules Scheme.
  • The information that is extracted from it is very useful, which is why many freelancers carry it even though they are not obliged to do so.
  • It is not necessary that any person with a specific qualification is in charge of its elaboration, nor that it be part of the company staff. It is enough that you have sufficient knowledge.

 

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