Accounting

What is contability?

Accounting is a branch of financial economics that produces quantitative information in a systematic, structured and expressed in monetary units, about the transactions carried out by various economic entities.

According to Enrique Fowler Newton: “accounting is a technical discipline that, based on data processing on the composition and evolution of an entity's assets (…) produces information for decision-making by administrators and interested third parties; and the monitoring of resources and obligations of said entity ”.

Accounting objectives

Accounting has the following objectives and functions:

• Record all operations of entry Y egress of a company.
• Inform the financial situation of the company.
• Facilitate decision-making at the different hierarchical levels of the organization.
• Serve as means of financial control in different functional areas of the company.
• Allow the methodical, systemic and comprehensive analysis of the information in which the entity incurs for the normal development of its activities.
• Constitute a preservation medium Y multiplication of capital.

Accounting elements

The main elements of which accounting makes use are the following:

• Assets: these are the assets, properties or rights that a natural or legal person possesses.
• Liabilities: obligations that a natural or legal person must fulfill in the future. Ex: debts.
• Equity: also called capital, it is the difference between assets and liabilities.
• Accounting books: files or documents in which the financial and economic information of a company is recorded.
• Financial statements: reports and records of economic and financial activities.

Types of accounting

Accounting is a very broad science, so it can be classified as follows:

According to its origin

• Public accounting: it is the branch of accounting that is responsible for the processing of patrimonial data of the public administration of a country at its different levels (municipal, provincial or national).
• Private accounting: is one that is responsible for registering the economic-financial operations of a particular company or of natural or legal persons.

According to the activity

• Industrial accounting: deals with the recording of transactions of a manufacturing company, focusing mainly on the valuation of inventories and the cost of finished products.
• Business accounting: is the branch of accounting that focuses on the activities of a business, keeping the record of its operations and the breakdown of taxes to pay to the treasury.
• Service accounting: is the accounting used by companies in the service sector. It includes the accounting processing of the expenses incurred in providing a service and the income received from the provision.

According to the information

• Financial Accounting: its objective is to record all the economic and financial operations of a company, as a result of its commercial transactions.
• Administrative accounting: It is carried only for internal use of the company, mainly to facilitate the functions of the administrative area during planning and decision-making.
• Tax accounting: deals with the registration of information related to tax obligations. It includes the presentation of sworn statements, annual balances, payment of taxes, etc.
• Cost accounting: this branch of accounting breaks down the operating costs of an activity into different cost centers (purchases, production, sales, etc.) to facilitate the study of the cost structure of a company.
• Management accounting: records financial operations in order to know and control costs, contributing to planning and decision-making.

Importance of accounting

Accounting is one of the most relevant elements of a company because:

• It allows to know the past, present and economic-financial future of an organization.
• Facilitates decision making through the analysis of the financial situation of the company.
• It serves as control medium to various sectors of the organization (sales, warehouses, production, among others).
• It provides data that, applied to ratios and indicators, allow inferring the financial health of the company.
• As an administrative management tool, it allows managing inventories, accounts receivable and payable, expenses and fixed costs, etc.
• Record all transactions that have to do with the main activity of the entity, facilitating the comparative analysis of accounting exercises during different years.
• At the time of requesting external financing, it offers information to banks about the company's equity evolution.