Accounting is one of the most important tools within companies. This system allows control over the current state of the organization’s accounts and provides an overview of the economic situation that the company is experiencing. It is needed to standardize the means of recording and drawing up the annual accounts of the business.
When you are starting a business, you can follow the general accounting plan which refers to the set of rules that regulate the accounting of companies. It establishes the procedures to be followed in the annual economic activity records, both nationally and internationally. It is mandatory to prepare the annual accounts in accordance with the laws implemented by the governing authorities.
One of the main objectives of general accounting plan is to achieve harmonization of the accounts at the internal level and also in relation to the international accounting standards so as to facilitate the investment decisions. In this way, thanks to this set of rules, principles and criteria, standardization is achieved in accounting.
In addition to being clear, comparable and agreeable, apart from achieving this desired homogenization, accounting information must be objective and reliable as per the official and conceptual framework, which defines the basic concepts of accounting in a comprehensive manner, from the principles, guidelines to be followed in the preparation of accounting documents to contain the elements in the annual accounts such as assets, liabilities and equity according to the balance sheet or those that are included in the income statement such as income and expense.
Within the structure of general accounting plan, in addition to an introduction explaining the reasons for the reform and detailing its fundamental characteristics, we find the following parts.
Registration and valuation standards
Definitions and accounting relationships
Creditors and debtors
Purchases and Expenses
Sales and income
Expenses charged to shareholders’ equity
Income attributed to Shareholders’ Equity
The presentation of annual accounts of the company will have to conform to the regulations established by the governing authorities in order to faithfully reflect the economic and financial situation of the company, as well as its evolution throughout the successive exercises. The official annual accounts models are published at the beginning of the year and are a great help for the correct application of the general accounting plan.