It is common, for self-employed entrepreneurs starting in business, not starting from any knowledge in accounting matters. This can make it difficult to control and monitor your activity. Through the following article “Accounting for Dummies: Accounting Guide for Beginners” we will analyze some points that should be taken into account.
The accounting
First of all, we must know that accounting is responsible for recording all operations related to the business activity of an organization. The objective, therefore, is to collect all the information in an orderly manner.
The Financial Statements are in charge of collecting the accounting information, these being a type of report that is aimed at both internal and external users. These documents show the assets, rights and obligations of the company.
The Financial Statements are made up of:
- Balance sheet: This document includes what the company has, what it owes and its capital. These would be the assets, liabilities, and equity.
- Profit and Loss Account: This document includes the income and expenses that have occurred in the period.
- Statement of Cash Flows: It informs us about the use of cash, that is, money, carrying out a classification based on its type.
- Statement of Changes in Net Equity: It allows us to observe the equity situation, or in other words, the evolution that it is having in the period.
- Memory: This document collects in a comprehensive and detailed way the information collected in the previous documents.
Accounting of operations
The recording of accounting operations is carried out through what is known as accounting entries. This concept refers to the set of annotations or notes that are made in the accounting books and whose objective is to record an economic fact.
Some accounting terms that you should know and that are common in the records are:
- Load: which would correspond to the annotations on the debit or on the left side of the seat.
- Pay: it would correspond to the annotations on the credit or right of the seat.
A square entry will mean that the debit and credit amounts coincide, therefore, if the accounting has been correctly recorded, these amounts must be square.
Some of the operations that we will collect in the accounting entries will be:
- Purchases and expenses.
- Sales and income.
- Salaries
- Acquisition and granting of credits.
- Grants
- Investments
- Etc.
Some aspects that we have to consider when registering and keeping the accounts correctly are:
- Keep a good record of accounting documentation, such as:
- Invoices.
- Orders.
- Budgets.
- Delivery notes.
- Tax documents.
- Etc.
- Post the entries corresponding to each document.
- Carry out the well-known “bank reconciliation”, which consists of justifying each accounting movement with your invoice. In this way it is verified that everything agrees.
- Check the accounts and balances to avoid duplication or errors.
Mandatory accounting record
As established by the Commercial Code in its article 25, every entrepreneur must keep an orderly accounting of his activity. However, depending on the legal personality of the company and the type of estimation of the performance of the self-employed, keeping it will be mandatory or not.
Before the law, two groups can be distinguished :
- Commercial entities that are required to file the IS (Corporation Tax).
- Self-employed persons, communities, Civil Societies that pay personal income tax through direct, simplified and objective estimation.
Accounting Presentation
The presentation of the annual accounts will vary depending on the type of company.
In general, most companies make the accounting close coincide with the calendar year. Therefore, the fiscal year begins on January 1 and ends on December 31, having to submit the annual accounts in the registry before July 30.
The administration of the company will have a period of 3 months from the close of the fiscal year, to formulate the accounts. Once these are generated, one month is granted for presentation to the General Meeting, where they must be approved.
It should be taken into account that in the event that these are not presented in the registry on the specified dates, the company may be sanctioned by the Accounting and Auditing Institute (ICAC).
Many accounting softwares makes this process of accounting presentation easy with the great flexibility and customization.
Therefore, it will be of vital importance, not only to correctly record the operations carried out by the company, but also to control the accounting obligations to which we are exposed. So that the whole process from start to finish is adequate in your presentation.