Accounting

Accounting is a science and a technique that provides useful information for the economic decision-
making process. This discipline studies assets and presents the results through accounting or
financial statements.

Accounting involves the analysis from different sectors of all the variables that affect this field. For
this purpose, it is necessary to keep a systematic and chronological record of financial operations. In
a company, therefore, it involves controlling all its daily operations: purchases, sales, expenses,
investments, etc. The accountant must record, analyze, classify and summarize these operations to
include them in a statement or balance sheet with accurate information.

There are different specialized phases that are part of accounting:

 The cost department is dedicated to classifying and collecting information on current and
prospective costs;
 The tax law, for its part, is based on the tax legislation of each country. The accountant must
be responsible for preparing the relevant reports for filing declarations with the Public
Administration and for paying taxes;
 The financial phase is the one that focuses on quantitative information about transactions
and other economic events that are susceptible to quantification;
 Finally, the administrative aspect is linked to the preparation of internal reports. The
information is analyzed by the organization's own managers, who will make management
decisions based on the data provided. A company's policies are often based on these
management accounting reports.

Goals
 Provide information. To owners, shareholders, banks and managers, in relation to the nature
of the value of the things that the business owes to third parties, the things owned by the
business. However, its primary objective is to provide reasoned information, based on
technical records, of the operations carried out by a private or public entity. To do this you
must do:
 Records based on technical systems and procedures adapted to the diversity of
operations that a given entity may perform.
 Classify recorded operations as a means to achieve proposed objectives.
 Interpret the results in order to provide detailed and reasoned information.

Regarding the information provided, it must meet an administrative and a financial objective:

 Administrative. provide information to internal users to supply and facilitate intrinsic

management planning, decision making and control of operations. To do this, it includes
historical, present and future information on each department into which the company's
organization is subdivided.
 Financial. provide information to external users about operations carried out by an entity,
mainly in the past, which is why it is also called historical accounting.
Importance.
Its importance lies in the fact that all companies need to keep track of their commercial and
financial negotiations. Accounting is a technique that deals with recording and summarizing the
business operations of a business in order to interpret its results. Therefore, managers or directors
can use accounting to determine the course of their business using accounting and statistical data.
This data provides information on the company's stability and solvency, the flow of collections and
payments, sales trends, costs and general expenses, among others. So that the company's financial
capacity can be known. On the other hand, the services provided by accounting are essential to
obtain legal information.

Bookkeeping.
Bookkeeping is keeping accounting books, preparing them, organizing them and having them
available to the company when they need them.

In this order of ideas, the objective of bookkeeping is none other than to achieve one of the
purposes of accounting, which is to chronologically record the economic events of the company.

By means of bookkeeping, the economic events that have occurred or been developed by the
company can be recorded, captured, or printed in a physical book or on magnetic media. It is
possible to classify, organize and record each company operation, which is precisely what
accounting deals with through bookkeeping.

It also allows the company to have accounting and economic information available over time, to be
consulted, to be used in the preparation of reports, studies, analysis, and most importantly, to be
used as a tool for decision-making.

In short, the objective of bookkeeping is to make accounting a reality, since it is through

bookkeeping that it is possible to keep a chronological and historical record of everything that
happens in the company in accounting, economic and financial matters.

Differences between accounting and bookkeeping

Accounting is responsible for:

 Analyze and evaluate economic results.

 Group and compare results.
 Plan and summarize the procedures to follow.
 Monitor compliance with what is scheduled.

Bookkeeping, meanwhile, deals with:

 Collect, record and classify company operations.

 Narrate the accounting facts in writing.
 Execute tasks according to pre-established procedures.
 It is under the control and supervision of the accountant.
International Accounting Standards (IAS)
NIC-1. Presentation of financial statements (revised in 1997).
NIC-2. Stock (revised in 1993).
NIC-3. Superseded by IAS 27 and IAS 28
NIC-4. Accounting for depreciation.
NIC-5. Superseded by IAS 1.
NIC-6. Superseded by IAS 15.
NIC-7. Statement of cash flows (revised in 1992).
NIC-8. Net profit or loss for the period, fundamental errors and changes in accounting policies.
NIC-9. Research and development costs.
IAS-10. Contingencies and events occurring after the balance sheet date (revised in 1999).
IAS-11. Construction Contracts (revised in 1993).
IAS-12. Income tax (revised in 2000).
IAS-13. Superseded by IAS 1.
IAS-14. Segment financial information (revised in 1997).
IAS-15. Information to reflect the effects of price changes (paragraphs rearranged in 1994).
IAS-16. Property, plant and equipment (Tangible fixed assets (revised in 1998)).
IAS-17. Leases (revised in 1997).
NIC-18. Revenue (Revenue (revised 1993)).
NIC-19. Employee benefits (Employee Compensation (revised 2002)).
NIC-20. Accounting for government grants and disclosure of government aid (paragraphs
rearranged in 1994).
NIC-21. Effects of Changes in Foreign Currency Exchange Rates (Effects of Changes in Foreign
Currency Exchange Rates (Revised 1993)).
NIC-22. Business Combinations (revised 1998).
NIC-23. Interest costs (revised in 1993).
NIC-24. Related Party Disclosures (Related Party Disclosures (Paragraphs Rearranged in 1994)).
IAS-25. Accounting for investments
NOTE: This standard was superseded by IAS 40, with respect to accounting for investment property.
IAS 25 was withdrawn when this standard came into effect.
IAS-26.Accounting and financial reporting for retirement benefit plans (paragraphs rearranged in
1994)
NIC-27. Consolidated financial statements and accounting for investments in subsidiaries
(Consolidated financial statements and accounting for investments in subsidiaries (revised in
2000)).
NIC-28. Accounting for investments in associated enterprises (revised in 2000)
NIC-29. Financial reporting in hyperinflationary economies (paragraphs rearranged in 1994).
NIC-30. Information to be disclosed in the financial statements of banks and similar financial
institutions (paragraphs rearranged in 1994).
IAS-31. Financial information on interests in joint ventures (revised 2000).
NIC-33. Earnings per share (1997).
NIC-34. Interim financial information (1998).
IAS-35. Discontinued operations (Operations permanently discontinued (1998)).
IAS-36. Impairment of assets (1998).
NIC-37. Provisions, contingent assets and contingent liabilities (1998).
NIC-38. Intangible assets (Intangible assets (1998)).
NIC-39. Financial instruments:
NIC-40. Investment properties (2000)
NIC-41. Agriculture (2001)

Statements of Accounting Principles (SAP)

DPC-0. Basic Standards and Generally Accepted Accounting Principles.
DPC-2. Accounting for costs and expenses of companies or activities in the development period.
DPC-3. Accounting for Income Tax
DPC-6. Disclosure of Accounting Policies.
DPC-7. Consolidated and combined financial statements and valuation of permanent investments
using the equity method.
DPC-8. Contingencies.
DPC-9. Capitalization of interest costs.
DPC-10. Standards for the preparation of financial statements adjusted for the effects of inflation.
DPC-11. Cash flow statement.
DPC-12. Accounting treatment of foreign currency transactions and conversion or translation of
foreign operations.
DPC-13. Accounting for Construction Contracts.
DPC-14. Accounting for Leases
DPC-15. Accounting for Investments.

Legal Provisions and Regulations. Commercial Accounting

Through accounting, both managers and partners can know in advance the economic productivity of
their company, which will determine its debt capacity based on its liquidity, equity solvency and
effective value of the share capital. In other words, it constitutes a reliable means of information to
establish the economic capacity of the company to undertake obligations.

Commercial Accounting is broadly defined as a way of recording, classifying and summarizing all the
commercial operations carried out by a company, in order to subsequently interpret its results, in
order to know with certainty its financial situation. It offers the practicality of keeping a descriptive
record - which can be done manually or mechanically - of the different processes that are carried
out in the free development of commercial activity, allowing the subjects involved to know the
results obtained during a certain period of time.

Of the Mandatory Books and the Auxiliary Books

The Commercial Code establishes in its article 32, the obligation for every merchant to keep the
company's accounting, through the use of the main books, which include: the Daily Book, the
General Ledger and the Inventory Book. Furthermore, the same law grants the entrepreneur, on an
optional basis, the power to keep any other auxiliary book that he considers pertinent for the
greatest order and clarity in his operations, such as, for example, the Cash Book, the Operations
Book or the Letter Copy Book.

Required books.
  Diary Book
This book records the operations carried out day by day in chronological order, expressing the data
of the creditor, debtor and specifications of the negotiation. There is the possibility, for those
merchants with a retail character, to comply with such obligations, recording a daily summary of the
operations carried out in cash, and applying greater emphasis to those carried out on credit. These
powers are established in article 34 of the aforementioned Code.

The Journal is known as the book of original entry, because it is where the company's operations are
recorded for the first time. This book may not be put into use without having previously been
submitted to the Commercial Registrar, in order for it to be duly authorized, as provided for in
article 33 eiusdem.

 Ledger
It organizes all the entries that were recorded in the Journal, placing special emphasis on the
identification of clients. Cash and credit transactions, payments, and guarantees are recorded. This
book represents the place where all the operations recorded in the Journal are transferred,
including, among other data, the date of each operation, its nature, and type. A particularity of this
book is that it shows the particular situation or account status with each client, creditor or debtor.

It is considered the most important book in any accounting system, since it records individual or
collective accounts of the material goods, rights and credits that make up the assets; the debts and
obligations that make up the liabilities; the capital; the profits and losses, and in general all the
operations of a company.

 Inventory Book
The Inventory Book establishes an estimated valuation of movable and immovable property and
credits. This book allows the merchant to have an appreciation of the current assets, at the
beginning and then at the end of each financial year, expressing the type and nature of the asset, its
value, when it was acquired, depreciation and adjustment for inflation, among other aspects.

Among its essential characteristics is its more than necessary closure with the Balance Sheet and the
Profit and Loss Account. According to article 35 eiusdem, the Inventory Book must be signed by
those persons in the establishment who have participated in its formation.

Auxiliary Books
The Commercial Code establishes in the only section of article 32, the power for merchants to keep
all the auxiliary books that they deem convenient for the greater order and clarity of their
operations.

The auxiliary or optional books include: the Cash Book, the Invoice Book and the Letter Copier.
Like all other accounting books, they must comply with the general requirements established by law
for their correct use, which include, among others: authorization, as well as not having any type of
alteration.

 Profit and Loss Accounts and Balance Sheets

The first section of article 35 of the Commercial Code requires that the inventory be closed with the
Balance Sheet and the Profit and Loss Account. Both financial statements are prepared with the aim
of presenting a periodic report on the current situation of the business, on the processes of the
Administration, and the results obtained during a certain economic period.

For Barboza, E (2007) the balance sheet "constitutes a demonstrative statement of the company's
financial situation..." (p.107); it represents: "A report produced [...] with the purpose of measuring
the net book value of a company on a certain date, and its risk to potential creditors. This document
[…] reflects the assets, liabilities and equity of the owners, including the operating surplus, (surplus),
or natural growth of the company.”

The preparation of this balance sheet is of great importance for every economic entity, since it
shows in an orderly manner all the accounts that constitute the assets, rights, obligations and capital
for a given date. It establishes, in more detail, where the company's funds are invested (assets) and
their origin (liabilities and capital).

This report must be prepared at least once a year, at the end of the financial year, or for shorter
periods (monthly, quarterly, half-yearly) in accordance with current laws and the company's bylaws.

In the case of Public Limited Companies, Article 304 of the Commercial Code requires that the
balance sheet accurately show the profits actually obtained and the losses experienced, establishing
the items in the corporate assets at the value they actually have or are presumed to have.

With respect to the Profit and Loss Accounts, or Income Statement, these are defined as those
where businesses are summarily classified, from the point of view of profits (income) and losses
(expenses), that have occurred during the respective financial year.

According to the aforementioned Article 35, the Profit and Loss Account, or Income Statement, must
demonstrate with evidence and truth the benefits obtained and the losses suffered, making express
mention of the guarantees granted, as well as any other obligations contracted under a suspensive
condition, with a note to the respective counterparty.

Income would be the amounts obtained from the sale of goods or services produced by the
company, while expenses reflect all those transactions that make it possible for the company to
develop its activity, which is why they include salaries, rents, interest payments and taxes, among
others.

Its importance lies in the fact that through it, it describes the transactions that result in a profit or a
loss, examining from a general point of view, the effectiveness and economic performance of the
company.
  Evidentiary Value of Books and Their Production in Trial
Article 38 of the Commercial Code states:

The books kept in accordance with the preceding articles may be used as evidence between
merchants for commercial acts. With respect to another person who is not a merchant, the entries
in the books will only be valid against their owner; but the other party may not accept the favorable
part without also admitting the adverse part that they contain.

According to this device, in principle, the Commercial Books do not constitute any evidence by
themselves. Valeri, P. (2004) states that: “The proof is based on the well-kept entries in the
mandatory Commercial Books, that is, that none of the assumptions prohibited by the Commercial
Code have been incurred” (p.88). Therefore, these entries constitute evidence between merchants,
in everything that benefits or harms them.

Now, for non-merchants, the entries are valid only against their owner, but the other party cannot
accept anything favorable that may arise from these books, if at the same time it does not also
accept anything adverse that may arise from them. Barboza, E. (2007) adds: “the accounting books
will be attested against their owner, since, virtually, these books contain an extrajudicial confession
of the businesses and obligations contracted by the merchant” (p.89).

Likewise, article 124 of the same law establishes that: “Commercial obligations and their release are
proven: …With the commercial books of the contracting parties…”. That is to say, the Commercial
Books will only be subject to evidence between merchants for commercial facts, and the evidentiary
force and effectiveness of these will be subject to the prudent discretion of the judge.

In this sense, Morles, A. (2004) notes:

The evidentiary degree of the books is a matter that the law leaves to the judge's discretion and,
consequently, the latter may consider them from full proof of the obligation to simple presumption
hominis depending on the length and clarity of the entries and the remaining elements that the
magistrate considers. (p. 416)

With respect to the Auxiliary Books, for their entries to have legal effect, these must be legalized by
the Commercial Registrar and be kept correctly without incurring in the prohibitive assumptions of
article 37 of the Commercial Code.

Similarly, the Commercial Code in its article 40, prohibits investigations by a Court or any authority
to inquire whether or not merchants keep books, or whether these are in accordance with legal
requirements. However, if the trader attempts to enforce the altered entries, he may incur both
civil and criminal liability, depending on the circumstances of the case. Furthermore, in the event of
default on the part of the latter, such facts contribute to establishing facts demonstrating culpable
bankruptcy or fraudulent bankruptcy, classified in the Venezuelan Penal Code as crimes. (Valeri, P.
2004, p. 88).
On the other hand, it is important to take into account the so-called general manifestation or
examination of the Commercial Books, which may be agreed upon ex officio or at the request of a
party, only in the specific cases of article 41 of the Commercial Code, that is, in matters of universal
succession, community of property, liquidation of legal or conventional companies, and in cases of
delay and bankruptcy.

Finally, with respect to the proof of obligations contracted between Venezuelans and foreigners, the
laws of the country in which the merchant carries out his activity must be taken into account, in
relation to the books and the way of keeping them (locus regit actum), and to estimate their
probative value, the law of the country before whose courts the corresponding claim is asserted (lex
fori) must be taken into consideration. (Barboza, E. 2007, p.109). In this order of ideas, article 116 of
the Commercial Code provides: “All acts concerning the execution of commercial contracts entered
into in a foreign country and fulfilled in Venezuela will be covered by Venezuelan law, unless the
parties have agreed otherwise.” In these cases, the general principles of Private International Law
and the respective law (Bustamante Code) must be observed.
Notes and references.
Bibliographic (e-Books)
ALBORNOZ VALERI, P. (2004). Commercial Law Course. Caracas, Venezuela: Liber Editions.

BARBOZA PARRA, E. (2007). Commercial Law. Theoretical and practical manual. (13th. ed.). Caracas,
Venezuela: Mc Graw Hill Interamerican Publishing House of Venezuela, SA

GARAY, J. M. (2004). Commercial Code. Noted. (5th ed) Caracas, Venezuela: Juan Garay Editions.
Articles: from 32 to 44 both inclusive.

GOLDSCHMIDT, R. (2006) Commercial Law Course. Caracas, Venezuela: Andrés Bello Catholic
University.

MORLES HERNANDEZ, A. (2006). Commercial Law Course “Commercial companies”. (8th. ed. T. 1).
Caracas, Venezuela: Editorial Texto, CA

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9788415056577.

García Castellví, Antonio (coord.) (2008). Financial accounting. Analysis and application of the 2007
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http://es.wikipedia.org/wiki/ISBNISBN 978-84-691-1809-2. Retrieved November 29, 2011.

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[Accessed: 2008, September 12]

What is Business Accounting? (sf) [Online Document] Available:

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September 01]

RODRIGUEZ, M. (2006) Commercial Accounting. [Online Document] Available:

http://www.monografias.com/trabajos16/contabilidad-mercantil/contabilidad-mercantil.shtml
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ALIAGA M. [Online Document] Available:

http://www.monografias.com/trabajos12/norin/norin.shtml

Statements of Accounting Principles (SAP) [Online Web Page] Available:

http://www.elcontadorpublico.com.ve/SAP.htm

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http://dmsociedadmercantil.blogspot.com/2011/03/contabilidad-mercantil-en-venezuela.html

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 Bolivarian Republic of Venezuela

Ministry of People's Power for Higher Education

Bolivarian University of Venezuela – Zulia Campus

Alonso de Ojeda University Village

Chair: Accounting I

Accounting and Bookkeeping

Made By:

Samuel Rincon ID: 17915829

Patricia Valbuena CI: 16,352,298

1st Administration

Maracaibo, March 29, 2014.