Accounting can be defined as a discipline that is responsible for recording, analysing and studying the financial movements that occur in a company or an institution because of carrying out its activity.
The recording of the transactions that take place within the company is therefore very important in order to be able to quantify, for example, what income the company has generated and what expenses it has incurred over time, what it has been its net profit in a period of time or what its financial structure is. These data make it possible for the managers of the company to make decisions based on them, with the aim of pursuing the survival of the company by making an increasing profit over time.
From what has been pointed out above, some basic accounting concepts emerge, which will be completed and defined below, depending on their allocation to the income statement or the balance sheet:
- Income statement: Accounting instrument that shows the income and expenses that the company has recorded and that shows the profit made in a given period.
- Income: Accounting entry that is recorded when the right to collect something is acquired.
- Expense: Accounting entry that is recorded when the obligation to pay something is incurred.
- Collection: Cash inflow or entry of any other means of payment corresponding to an income.
- Payment: Cash outflow or exit of any other means of payment corresponding to an expense.
- Profit: Accounting entry derived from the difference recorded between income and expenses for a period.
- Balance sheet: Accounting instrument that represents the equity situation of the company at a given time, the expression of the various assets and rights, as well as its debts and capital.
- Goods: Factors that the company uses in one way or another in its production process or that it sells in the market directly.
- Debts: Amount of money that a company owes and that constitutes an obligation that must be paid within a specified period.
- Main aggregates:
- Assets: The assets of a company include every asset and right in which it has invested.
- Liabilities: The liabilities of a company include every debt of the company, with either financial institutions or suppliers, in the short and long term.
- Equity: Difference between the accounting assets and liabilities of a company. In a generic way, it is made up of the contributions made by the shareholders (which are called capital), as well as the reserves and undistributed result.
