Degree:

Business Administration and Management (ADE)

Economy (ECO)
Subjects: 363655 CONTABILIDAD I (ADE)
361827 CONTABILIDAD (ECO)

Unit I – Sub-unit 4
Professors: J. Boria, J.A. del Castillo, P. Curós, A. González, I. González,
M. Losilla
 Subject: ACCOUNTING I

Unit I – Sub-unit 4.- Formal aspects of account representation and

coordination
4.1.- Legal regulation of accounting
4.2.- Accounting books: necessary, mandatory and auxiliary books
4.3.- Process of accounting data using IT applications
4.4.- Introduction to the accounting cycle

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4.1.- Legal regulation of accounting

• Commercial Code A
• Capital Companies Law C
C
• General Accounting Plan and sectorial adaptations O
U
• ICAC Resolutions N
T
I
• Audit Law N
G
• Rest of commercial legislation with accounting relevance
• IAS – IFRS

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 A
•Low accounting
• Incorporation to C
regulation • First PGC in the EU in 1986 C
• Financial 1973 • Adaptation of • Adaptation of
institutions, • Voluntary the PGC to the the GAP to
O
Until
insurance 1973- character 1990- Directives: new From the IFRS: new U
companies and
1973 listed companies
1990 • Start of 2007 1990 PGC 2007 PGC 2007 N
accounting • Partial T
• Heterogeneity of standardization enforceability I
accounting
principles and • New Audit Law N
standards G

“PGC” = Spanish General Accounting Plan

Source: Esquemas de Normativa Contable, Year 2016-2017, ADE, FEE-UB, Dr. Javier Osés García

® Prof. J. Boria, J.A. del Castillo, P. Curós, A. González, I.

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 Accounting and
Commercial Code Capital Comisión
General Auditing Institute
Companies Law Nacional del
(“Código de Directorate of (“Instituto de Mercado de
(“Ley de Bank of Spain A
Comercio”) Insurance and Contabilidad y Valores
Sociedades de Pension Funds C
(Arts 25 to 49) Auditoria de
Capital”) (CNMV)
Cuentas (ICAC)”) C
O
U
From the books Regulations Regulations
of
Multiple Regulations Issuance of applicable to N
references to applicable to applicable to resolutions on
entrepreneurs accounting banks, savings insurance
collective T
accounting and investment
topics banks, credit companies and auditing entities
I
unions, pension plan matters
branches of N
Of the annual managers
accounts foreign entities, G
Chapter VII-The and EFC
annual
Of the annual accounts
accounts of the
groups of
companies

Source: Accounting Regulation Schemes, Year 2016-2017, ADE, FEE-UB, Dr. Javier Osés García

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4.2.- Accounting books: necessary, mandatory and auxiliary
books
Accounting books are all those traditional recording instruments that serve to recognize accounting
A
transactions carried out by companies or other accounting issuing bodies. C
C
The principal or fundamental books of the accounting process are: O
 The Journal Book (chronological) U
N
 The General Ledger (synthetic) T
The Commercial Code regulates the formal elements of accounting in its articles 25 to 33, both I
N
inclusive. They indicate that every entrepreneur must keep an orderly accounting appropriate to his G
company's commercial activity that allows a chronological monitoring of all his operations and the
periodic preparation of balance sheets and inventories. It will necessarily keep, without prejudice to
what is established in the laws or special provisions, inventories book and annual accounts and another
Journal Book. Besides, mercantile companies must also keep a minute book or books, which will
contain all the agreements made by the general meetings and other collegiate bodies of the company.
® Prof. J. Boria, J.A. del Castillo, P. Curós, A. González, I.
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It is also indicated that the entrepreneurs will present the mandatory books in the Mercantile Registry
of the place where they have their domicile.
It is also established that all books and accounts must be kept, whatever the procedure used, with
clarity and accuracy, in order of dates. A
C
Accounting entries must be made expressing the values in euros. C
O
It is also specified that the merchants will keep the books, correspondence, documents, and U
supporting documents concerning their business, duly ordered, for six years, from the last entry made N
T
in the books. The cessation of the merchant in the exercise of his activities does not exempt him from I
this conservation's duty, and, if he has died, it will fall on his heirs. In the case of the dissolution of N
companies, their liquidators will be obliged to comply with the provisions regarding the duty of G
conservation.
Finally, it is established that the courts will assess the merchants' books and other accounting
documents' probative value under the general rules of Law.

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 Journal book
Inventory book and annual accounts • Obligatory A
Principals

Minutes book (non-accounting nature) C

C
O
U
N
T
General ledger
• Volunteer
I
N
Auxiliary books G

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Journal book
A
Record the daily transactions of the company. Joint annotation of totals C
C
for periods not exceeding the month is accepted, with details in other O
records. U
N
T
I
N
G

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Book of inventories and annual accounts
A
C
It opens with a detailed initial balance of the company. At least C
quarterly, the trial balances will be transcribed, with sums and O
U
balances. The year-end inventory and the annual accounts will also be N
T
transcribed. I
N
G

® Prof. J. Boria, J.A. del Castillo, P. Curós, A. González, I.

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General ledger

It is a synthetic record by concepts or elements (goods, rights, and A

C
obligations) that the company owns (or controls them economically). C
Every one of the transactions previously recorded in the journal book is O
U
classified and grouped. Despite not being a book that must be kept by N
T
commercial regulations, it is essential to know the movements and the I
specific situation of each of the company's accounting system N
G
elements.

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Auxiliary books
All those auxiliary records (sales, receivables, unpaid, cash, etc.) that it
deems necessary for an adequate register and control of its A
transactions, as well as all those that may be imposed by other non- C
C
commercial regulations (for example, the tax regulations). O
U
N
T
Minutes book I
N
G
Mandatory for commercial companies, it records the resolutions
adopted by the general meeting and the company's other collegiate
bodies.

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4.3.- Process of accounting data using IT applications

A
C
C
O
U
N
T
I
N
G

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Accounting information has undergone a fundamental transformation, thanks to the
new information and communication technologies (ICT).
Computer systems facilitated the processing of a more significant number of A
operations and greater security against specific manual errors. C
C
Windows environment was a significant advance for the revitalization, flexibility, O
and interconnection of information, allowing the export and import of information U
to or from other applications such as spreadsheets, word processors, databases…. N
T
Telecommunications revolution with the Internet's appearance by allowing I
N
electronic data exchange: electronic banking, connection with public G
administrations, data entry from remote PCs, generating orders, invoices, account
statements….
Computer programs allow the automation of routine processes by capturing data
and recording it directly through predetermined entries.
® Prof. J. Boria, J.A. del Castillo, P. Curós, A. González, I.
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 What is ERP? Enterprise Resource Planning.

These are business management software packages

that allow planning and controlling a company's A
resources and business processes. C
C
O
Modern ERPs are solutions capable of covering all U
areas of a business organization: finance, N
accounting, billing, sales, marketing, logistics, T
production, inventory, payroll, etc. ERP programs are I
N
made up of different modules or tools that G
correspond to each of these areas. In this way, the
company can decide which modules to implement at
any given time based on the activities of its business
that it needs to manage.

® Prof. J. Boria, J.A. del Castillo, P. Curós, A. González, I.

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 4.4.- Introduction to the accounting cycle
Opening Balances (only
balance sheet accounts)
Operations for the year A
C
C
Year-end Adjustments: O
U
 Accounting regularization N
 Accrual/Deferral of income and expenses T
I
 Valuation and impairment adjustments N
 Reclassification of balances (short vs long term) G
 Inventories regularization
 Income tax computation
 Determination of profit for the year
 Closing entry
 Preparation and presentation
® Prof. ofCurós,
J. Boria, J.A. del Castillo, P. financial
A. González, I. statements
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Opening phase

A
C
C
Opening entry: O
U
N
T
Dr. Balance sheet accounts to Cr. Balance sheet accounts I
N
with debit balance with credit balance G

® Prof. J. Boria, J.A. del Castillo, P. Curós, A. González, I.

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 Accounting phase of operations for the year

 Record of accounting events (Journal Book

and General Ledger) during the fiscal year.
A
 Trial balance: C
C
Accounts Debit Credit Dr balance Cr balance O
Capital - 60.000 - 60.000 U
Banks 50.000 30.000 20.000 - N
T
Purchases 100.000 - 100.000 -
I
Sales 150.000 - 150.000 N
.
. G
.

TOTALS ∑ Debit ∑ Credit ∑ Dr ∑ Cr

∑ Debit=∑ Credit
Dr: Debit balance ∑Dr = ∑Cr
Cr: Credit balance
® Prof. J. Boria, J.A. del Castillo, P. Curós, A. González, I.
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 Closing phase

Set of operations that are recorded at the end of the year A

C
C
Phases O
U
N
T
I
1. Accounting regularization N
G
2. Determination of profit for the year
3. Year-end accounting
4. Preparation and presentation of the financial statements

® Prof. J. Boria, J.A. del Castillo, P. Curós, A. González, I.

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 Closing phase: Accounting regularisation

Accounting information adjustment to reflect economic reality A

C
C
Phases O
U
N
T
I
1. Accrual/Deferral of income and expenses N
2. Reclassification of accounts from long to short term G
3. Inventories regularisation
4. Valuation and impairment adjustments: amortization/depreciation and
impairment of value

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 TYPE DESCRIPTION EXAMPLES
1. Anticipated Expenses recorded in the current year but that correspond Insurance, Rentals,
expenses totally or partially to the following year Advertising, A
C
2. Anticipated Income recorded in the current year but corresponding totally Subscriptions, C
income or partially to the following year Rentals, ... O
U
3. Accrued
Acrrued income but not collected or recorded Financial income N
income T
4. Accrued Financial expenses, I
Incurred expenses but not paid or recorded N
expenses salaries, ... G

Amortizations,
Adjust the book value of assets and liabilities to the estimated
5. Estimates Provisions,
real value of assets and liabilities
Impairment, ...

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 TYPE Causes of adjustment Situation before adjustment Standardizing entry
1. Conversion of Expenses paid in advance
Overvalued Asset and (D) Expenses
assets into and recorded in asset
Undervalued Expenses (C) Assets
expenses accounts A
C
2. Conversion of Income collected in advance C
Overvalued Liabilities and (D) Liability
liabilities into and recorded in a liability O
Undervalued Income (C) Income U
income account
N
T
Expenses incurred in the I
3. Recognition of Undervalued Expenses and (D) Expenses
year but not recorded or N
accrued expenses Liabilities (C) Liability
paid G

Income earned in the year

4. Recognition of Undervalued assets and (D) Assets
but not recorded or
accrued income income (C) Income
collected

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 Closing phase: Determination of the result

Settle the expense and income accounts to calculate the result for the year
A
C
C
Calculation of O
the result U
N
T
I
Income and expense settlement entries: N
G
Dr. Profit/los for the period to Cr. Expense accounts
Dr. Income accounts to Cr. Profit/los for the period

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 Closing phase: closing the accounting

Settle balance sheet accounts A

C
Close C
O
U
N
T
I
Closing entry: N
G
Dr. Balance sheet accounts Cr. Balance sheet accounts
with credit balance to with debit balance

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 Closing phase: Formulation of the annual accounts

Prepare and present the annual accounts A

C
C
Annual O
accounts U
N
T
1. Balance sheet I
N
2. Income statement G

3. Statement of changes in equity

4. Statement of cash flows
5. Notes to the financial statements
® Prof. J. Boria, J.A. del Castillo, P. Curós, A. González, I.
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Steps to follow:
Transactions of the
Opening entry year ordinary Trial Balance
journal entries A
C
C
O
U
Year end N
adjustments T
Income Statement Closing entries I
regularization journal
entries N
G

Balance Sheet

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Accounting profit
The result, an essential informational quantity for business management, can be A
observed and measured from two points of view, which are ultimately coincident. C
C
In the first, it is understood as the difference between income and expenses O
generated. In the second, we look for the increase experienced by the Equity, by U
N
the wealth of the company, which does not come from the contributions or T
amounts withdrawn by the owners. I
N
G

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So, the profit or loss during a year will be calculated by the difference between income
and expenses for that year: A
Resultn = In – EXn C
C
O
In the same way, the calculation of the company's global profit (throughout its life): U
N
Resultglobal = ΣIn – ΣEXn T
I
N
that is the sum of all the periodic results during the company's life, where we see that G
the periodic results are but partial divisions of the global one.

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• ¿What is an income?
Increase in equity (which does not come from contributions from
partners).
A
• ¿What is an expense? C
C
Decrease in equity (which does not come from distributions to partners). O
U
N

Expenses and • They represent currents or flows T

I
of goods, services or factors of
income production
N
G

Debits and • Reflect currents or monetary

credits flows

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The result is reflected in the Income Statement.

It shows the result after deducting the corporation tax, which is considered
an expense. A
C
C
It is a document in a list form. O
U
N
Important: Income: Positive sign. / Expenses: Negative sign. T
I
N
The result is given into: G
• Operating income: obtained from the usual activity of the company
• Financial income: resulting from financial transactions

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Volume of business
It represents the business activity of the company, measured monetarily. It is the A
value of the goods and services distributed by the company in its activity. C
C
Its calculation consists of the aggregation of: O
U
N
+ Income from sales of goods T
I
+ Income from services rendered N
- Sales discounts and returns G

Volume of business

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Gross margin (only for commercial companies)
We will obtain the commercial margin for the difference between the volume of
business and the cost of the goods and services sold. It is the difference between A
what we get from what is sold and what it has cost us to get it to the buyer. C
C
TM = Volume of business – Cost of goods and services sold O
The acquisition cost of the goods sold will be calculated by adding: U
N
T
+ Purchasing of goods I
This gross margin will N
- Returns and shopping discounts G
correspond only to
Net purchases consumptions of inventories
+ /- Variation of merchandise stocks
Merchandise consumption
Consumption or Supply = Net Purchases +/- Variation in Inventories
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Production for the year
It tries to measure the value of the productive effort made by the company
throughout the year, adding the value of the production sold, the unsold and the A
activity that the company has carried out for itself. It is the answer to the question C
C
how much is what the company has produced durint the period worth regardless of its O
final destination?. It is approximated by the sum: U
N
T
+ Volume of business I
N
+ /- Variation of merchandise stocks G
+ Company work for fixed assets
Production for the year

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 INCOME STATEMENT

A) CONTINUING OPERATIONS
A.1) RESULTS FROM OPERATING ACTIVITIES A
C
+/- A.2) NET FINANCE INCOME/(EXPENSE) C
O
= A.3) PROFIT/(LOSS) BEFORE INCOME TAX U
N
+/- Income tax expense T
I
= A.4) PROFIT/(LOSS) FROM CONTINUING OPERATIONS N
B) DISCONTINUED OPERATIONS G

Profit/(loss) from discontinued operations, net of income tax

A.5) PROFIT/(LOSS) FOR THE PERIOD

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 Discontinued operations

A
Result obtained from the sale of: C
C

 A line of business
O
U
N
 A geographic area T
I
 A dependent company N
G

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 INCOME STATEMENT
RESULTS FROM OPERATING ACTIVITIES
A) CONTINUING OPERATIONS
1. Revenue
2. Changes in inventories of finished goods and work in progress
A
3. Work carried out by the company for assets C
C
4. Supplies O
5. Other operating income U
N
6. Personnel expenses T
I
7. Other operating expenses N
8. Amortisation and depreciation G

9. Non-financial and other capital grants

10. Provision surpluses
11. Impairment and gains/(losses) on disposal of fixed assets
A.1) RESULTS FROM OPERATING ACTIVITIES (1+2+3+4+5+6+7+8+9+10+11)
® Prof. J. Boria, J.A. del Castillo, P. Curós, A. González, I.
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 INCOME STATEMENT
NET FINANCE
12. Finance income
a) Dividends
b) Marketable securities and other financial instruments
13. Finance expenses A
C
a) Group companies and associates C
b) Other O
U
14. Change in fair value of financial instruments N
T
a) Trading portfolio and other
I
b) Proceeds from available-for-sale financial assets N
G
15. Exchange gains/(losses)
16. Impairment and gains/(losses) on disposal of financial instruments
a) Impairment and losses
b) Gains/(losses) on disposal and other
A.2) NET FINANCE INCOME/(EXPENSE) (12+13+14+15+16)
® Prof. J. Boria, J.A. del Castillo, P. Curós, A. González, I.
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 A
C
Agreement between Bibliography and Syllabus of the Program of the subject C
GOXENS, LOSILLA, OSES y LOSILLA, MORENO y
LOSILLA RAMIREZ, M. MUÑOZ MERCHANTE MUÑOZ MERCHANTE GARCÍA y VICO SAEZ OCEJO OMÑACA GARCIA
RODRÍGUEZ RODRÍGUEZ
O
Prácticas de Introducción 277 ejercicios prácticos
Introducción a la
Contabilidad Financiera
a la Contabilidad
Financiera
de contabilidad. 1er
curso
Introducción a la
contabilidad
Prácticas de introducción
a la contabilidad
Introducción a la
Contabilidad Financiera
Fundamentos de
contabilidad financiera
Contabilidad General U
N
Tema Ed Garceta Ed Garceta Ed Librería Universitaria Ed Académicas Ed Académicas Ed CEF Ed Andavira Ed Deusto
T
1.4.- Aspectos formales de la
representación y coordinación Cap 4 n.a. n.a. Cap 14 Cap 14 Cap 8 I
contables
N
G

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 A
Thanks for your attention C
C
O
U
N
T
I
N
G