Financial Obligations and Accounting Principles
Financial Obligations of the Company: Annual Accounts
Definitions
Accounting System: Organized information based on a development and classification process that considers economic events.
Basic Functions of an Accounting Information System:
- Identify economic events.
- Rate the accounts.
- Annotate accounting records.
- Prepare reports for accounting decisions.
Accounting information is relevant to managers, partners/owners, the State, workers, suppliers, creditors, and lenders.
Heritage
The set of quantifiable assets, rights, and obligations belonging to a person or legal entity.
Assets (Goods & Rights) = Heritage = Positive side
Liabilities (Obligations) = Negative side
Assets = Liabilities + Equity
Economic Structure = Financial Structure
Investment = Funding Sources
Assets = Equity + External Funds
Patrimonial Elements
Each element that constitutes the heritage.
Patrimonial Mass: All homogeneous property elements with the same economic and financial meaning. Classified into assets, liabilities, and net worth.
Account Book: Measures and represents the value of patrimonial elements, reflecting the initial situation and changes over the year.
Debit an Account: Make notes on the debit side.
Credit an Account: Make notes on the credit side.
Settle an Account: Calculate the difference between debits and credits (balance).
Assets
Patrimonial elements representing goods and rights belonging to the company.
Non-Current Assets
Elements ensuring the company’s long-term operation. Divided into fixed assets, intangible assets, and financial investments.
Fixed Assets: Tangible elements of sustainable use, not intended for sale or transformation into other products, used for business development.
Intangible Assets: Intangible elements with economic value (e.g., patents, trademarks).
Depreciation: Systematic annual reduction of an asset’s value due to use, time, and obsolescence. Included among assets with a minus sign, reducing the asset’s value.
Book Value of Assets: Difference between the purchase price/production cost and accumulated depreciation.
Current Assets
Elements ensuring the company’s daily operations, held for less than one year. Divided into stocks, receivables, and cash, offering liquidity.
Real Assets: Elements with direct market value.
Fictitious Assets: Elements recorded but not sold on the market (e.g., notary fees).
Liabilities
Elements representing the company’s obligations to third parties.
Non-Current Liabilities
Contributions from the sole trader or partners and long-term obligations.
Equity
Employer’s contributions, representing the company’s own funds. Consists of capital and reserves.
Reserves: Undistributed company profits.
Current Liabilities
Short-term obligations the company must meet.
Fundamental Identity of Heritage
Assets = Liabilities + Equity
Economic elements are organized according to the General Accounting Plan.
Company Results
Profit: Net worth increases at the end of the fiscal year when total income exceeds total expenses.
Loss: Net worth decreases when total expenses exceed total income.
General Accounting Plan
Standardized accounting framework structured in five parts: conceptual framework, recording and valuation standards, annual accounts, chart of accounts, and definitions/relationships.
Annual Accounts
Mandatory information reflecting the true image of the company’s heritage, according to established accounting principles. Includes the balance sheet, profit and loss account, and the report.
Balance Sheet
Represents the company’s assets (investments) and liabilities (financing) at the end of the fiscal year.
Social Balance and Ethics Balance: Information on the company’s contributions to society and its social relations during the year.
Profit and Loss Account
Details income and expenses, quantifying the company’s income and its formation. Shows the results of the fiscal year, structured as follows:
- Results of exploitation
- Financial results
- Results of ordinary activities
- Results of extraordinary activities
- Results before taxes
Report
Explains in detail the economic events that occurred in the company, complementing the balance sheet and profit and loss account.