Accounting Manual.

The accounting manual is also called a accounting guide, it serves as a guide when
they record accounting transactions.

It is an independent document where, in addition to the numbers and titles of the accounts,
It details the type of transactions that should be recorded in each
one of them, along with the documents that support the transaction, as well as what
represents your balance.

Chart of accounts.

The set of accounts managed in an economic entity is known as the

account catalog name.

It is important to have an account catalog that offers flexibility to grow.

when the company expands or develops.

Accounting, through a process of capturing operations, measures, classifies,

register and summarize clearly. To make this happen, it requires a
catalog according to the business operation, with flexibility to adapt
orderly according to the needs of the business.

This is essential for the recording of operations in electronic systems.

data processing, since, without a catalog and a code, the
computer cannot process the operations or produce the required information.

A chart of accounts must have an order and it is necessary for the accounts to be grouped by
its nature: asset accounts, liability accounts, capital accounts, accounts of
income, cost accounts, expense accounts. This facilitates their location by classifying
the operation when registering and the summary.

Within its nature, there must also be an order that addresses different
purposes, namely:

Assets accounts must also be classified into two large groups. The first
it relates to its convertibility into cash and is called current asset; therefore, the
The first account will be the cash account, which represents the cash that the company has.
the second group includes the investments or debts in favor of the company that
they will be converted into cash in a period of more than one year, such as documents for
collect for more than a year, long-term investments, etc. As well as the assets that have been
acquired and represent tangible assets for the production, sale of goods and
services inherent to the business whose usage or consumption time is estimated to have been
prolonged, like investments in land, machinery, furniture, etc., and that
are called non-current assets. Within this group there are concepts that
represent expenses of the Catalog of Accounts content.

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frequency is referred to as deferred charges. Liability accounts are also classified
in two large groups: those that have a due date within one year are called
current liabilities or short-term, those that have a maturity of more than one year are
they are called non-current liabilities. Within these groups, it is shown, first
place, the concepts that have a higher degree of enforceability, such as documents
to be paid before accounts payable to suppliers.

From these two previous ones, a third group of concepts arises that can be considered
as a passive, but they convert into income over time. Among
they list the interest charged in advance, which is a liability if our debtor
liquidate your debt in advance or it will be transformed into income if you pay us by
maturity of the debt. This group is referred to as deferred credits.

Capital accounts are grouped starting with the contributions of the shareholders.
and owners to continue with the bookings and the profit or loss accounts.

Revenue accounts are also divided into two groups. The first groups the
accounts that are established as a result of their normal operations, and the
the second group deals with sporadic income, not directly related to
the operations of its social purpose, which are referred to as other income.

The concepts of costs group the accounts necessary to determine the cost of the
products or services sold. Finally, expense accounts are also classified
into two large groups. The first includes the expense accounts that represent
normal disbursements of the business as a consequence of its normal operation, and the
the second group includes the sporadic expenses not directly related to the
operations of its social object and are referred to as other expenses.

It is also customary to display the Income Tax in a special group and the
employee profit sharing.

To build the catalog and give it order and flexibility, the first code is assigned to:

0 Assets.
1 Liabilities.
2 Deferred credits.
3 Capital.
4 Income.
5 Costs.
6 Expenses.
7 Other income and other expenses.
8 Profit sharing for employees.
9 Income taxes.

Subsequently, the groups must be formed. Below, we illustrate some examples.

of them:

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0 Assets

1 First group: circulants

101 Box
102 Bank
103 Documents Receivable
104 Clients
105 Various Debtors

2 Second group: non-current assets

201 Mortgage debtors
202 Security Deposits
203 Delivery Team
204 Furniture and office equipment
205 Building

Double Entry Theory

We have seen that all trade operations have an impact on the

formula of the balance sheet and that, although the equality of that formula is not altered, it does
the values of assets, liabilities, or equity are modified. For example, if we make a purchase
of goods paying in cash, the asset does not change, but the goods increase
and decreases the bank account.

If we pay a supplier's credit, the equality that the formula represents is also not
it changes, but decreases the asset due to the bank account, also decreasing the
liability for accounts payable.

We have also seen that accounts serve to record the movement of values and
that operations must be recorded, either in their debit or credit, depending on whether there has been
increase or decrease.

Consequently, for each charge, a payment must be made touching different accounts and
there will be many cases where an account is charged by paying two or more and vice versa, but
it must always be that the charges and credits made are of the same amount.

This method of making entries is called double entry in accounting because

By virtue of it, the annotations must be made twice.

However, it should be noted that asset accounts are not handled in the same way as
the liabilities and equity, since:

a) When an asset account increases, it must be debited, and when it decreases, it must be credited.
to subscribe.

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b) The management of liability and equity accounts should be the reverse: when the increases the
passive, the account must be credited and when it decreases, it must be debited proceeding in the
same way with capital or result accounts.

c) In the income statements, these are credited by the products or profits, which are
increases to capital; and they are charged against the expenses or losses, which are decreases to
said capital.

Rules for charging and crediting

Load the accounts where Pay the accounts where

Increase the asset 4. Reduces the asset
2. Decrease the liabilities 5. Increase the liabilities
3. Decrease the capital Increase the capital

Cargo Credit
Account Title Sign and class No. Account title Sign and class
1 Merchandise +A 4 Box -A
1 Clients +A 4 Goods -A
1 Goods +A 5 Suppliers +P
1 Furniture and equipment +A 5 Div creditors +P
of office
2 Suppliers -P 4 Banks -A
2 Suppliers -P 4 Goods -A
3 Administrative expenses. -C 4 Banks -A
1 Merchandise +A 4 Banks -A
5 Suppliers +P
3 Selling expenses -C 4 Banks -A
5 Various creditors +P

Rules of debit and credit.

An increase in assets means a decrease in assets.

An increase in assets means an increase in liabilities.
An increase in assets means an increase in capital.
A decrease in liabilities means a decrease in assets.
A decrease in liabilities means an increase in liabilities.
A decrease in liabilities means an increase in equity.
A capital decrease means a decrease in assets.
A decrease in capital means an increase in liabilities.
A decrease in capital means an increase in capital.

The previous rules can be read from right to left and vice versa.

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Operation record

The bill

Accounts are the set of records where details will be described in a detailed manner and
ordered, the history of each of the concepts that make up the state of affairs
financial and the income statement. They can also be defined as the record of the
increases or decreases in balances of the individual concepts that make up the
financial position statements and the income statement.

Accounts can be of assets, liabilities, equity, and results. The income accounts,
of operation, they will refer to the income, costs, and expenses of the economic entity.

In the accounts, the amounts from the operations are added and subtracted, and to do this it is
It is necessary to establish several rules that indicate the history of each of the concepts.
that make up the financial statements, as follows:

The name of the account must correspond to the concept whose history or relationship is being
to carry; for example, the 'cash' account will be assigned to the money that will be in the cash register
the company; 'bank', to the money that will be in the checking account; 'clients', to the
pending collection from the company's clients
finished goods or warehouse, to the inventory of products ready for sale; 'accounts receivable'
paying suppliers”, to the pending purchases that we have with our
suppliers; 'social capital', to the contributions made by the shareholders;
sales, to the operations we have carried out with clients; 'selling expenses', to the
that have been generated due to sales, etc.

2. Each account will be allocated a sheet divided in half, as follows:

Account name

The left space is called

Must. News.

To the sum of the amounts To the sum of the amounts in

noted in this space is called this space
callDebtorMovement. Creditor movement.

The difference between debtor movement and creditor movement is called balance.

2. If the debtor movement is equal to the creditor movement, the balance is zero and it is said
that the account is settled.

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 Account name

If the debtor movement is greater than if the creditor movement is greater

the creditor is called debtor balance. what debtor, is called creditor balance.

The records made on the side The records made on the side
left are called charge or debit. they are called payment or credit.

The following strikethrough is generally used for the accounts:

Account name
Date Concept Must News Balance

Accounts can be of a debit or credit nature. Let's remember the equation

accounting of:

Assets = Liabilities + Equity

This equality must be maintained in the account register, the asset accounts.
we will record them in the debit (left side) and the liability and equity accounts in the
news (right side).

Count
Must News
active liabilities + capital

Therefore, asset accounts are of a debit nature, and their normal balance must
being a debtor. The liability and equity accounts are of a credit nature and their balance
natural must be a creditor.

What happens with the income statements? If the capital is of a creditor nature
and if the profits increase and the losses reduce it, we must continue
maintaining the equality of the equation. Therefore, the income accounts that produce
an increase in capital is of a creditor nature and is recorded in the credit side (side
law) and the cost and expense accounts that produce a decrease in capital are of
debtor nature and are recorded on the debit (left side), as follows:

Income statements
Must News
Costs and expenses Income

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 If the balance of the income statement is creditor, it represents a profit; for the
on the contrary, if it is a debtor it represents a loss.

Debtor accounts start their balance with a charge or debit,

registering this on the debit or left side of the account. The accounts of nature
creditor starts their balance with a credit or deposit, being registered in the credit side or account
right of the account.

Classification, nomenclature and movement of accounts

Active

Circulating (Monetary)

Cash and valuables: Money, certificates of deposit, checks.

Billing to the clients of the economic entity.

Documents receivable: promissory notes and bills of exchange, any promise of payment
documented.

Various debtors: Loans granted to employees of the economic entity.

Inventory: Goods and items intended for manufacturing or sale.

Tax advances: provisional payments; income tax or tax on

active.

Insurance premiums and other prepaid expenses: Insurance and other contracts paid
in advance by the company, and that grant them protection or right of use, or enjoyment
of certain benefits.

Non-current (Non-monetary)

Real estate, machinery, and equipment: Movable and immovable property that the economic entity
acquire in order to be able to carry out its activities.

Intangibles: Assets without physical substance that are used for production or operation
normal of the economic entity, for example, patents, trademarks, installation costs, among others
others.

Passive
Current liabilities (less than one year)

Suppliers: Billing for the purchase of goods or materials for sale or

transformation (inventories).

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Creditors: Billing for contracted services related to the activity
primordial of the organization.

Documents payable: Amounts payable, in the form of promissory notes or other titles
of credit.

Taxes payable: Amounts payable for the concept of taxes

ISR and PTU: Amounts payable for income tax and

participation of workers in the entity's profits.

Non-current (more than one year)

VAT payable: Amounts payable for the Value Added Tax.

Labor obligations: Amounts to be paid for seniority bonus.

Long-term credits: Amounts payable for the purpose of credit amortization.

Deferred taxes: Estimation resulting from the calculation of taxes on profit

brutal.

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 Journal Book.

To record the company's transactions, we will use a journal, which

It is a record that has been used since the time of Luca Paccioli.

It consists of keeping a chronological record of each and every operation.

carried out by the entity, noting the date of the transaction, with whom it is conducted,
the concept for recording, the corresponding charges and credits for its recognition
in our accounting system and a brief writing that describes the purpose of the
transaction.

When making entries in the journal, we can classify them into two types:
simple and compound.

Simple entries are those in which we only have a debit and a credit.
while in the compound there may be one or more debit accounts and one or more
credit accounts.

Example1: Purchase of a Television in cash for $3,000.00, on May 15.

Example 2. A supplier was paid by check the amount of $2,000.00 on the 13th of
September.

Ledger.

The ledger is the record where we will concentrate the movements that took place.
accounts of assets, liabilities, equity, and results during the corresponding period.
In the ledger, an individual page will be opened for each account that has been opened in the
chart of accounts.

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 Broadly speaking, the ledger allows us to track the trace of the
transactions of the entity in a much more transparent and individualized way
accumulate the movements of each period with the sole objective of obtaining the balances
corresponding that we will present in the corresponding financial statements
same.

Within the larger context and as support in the control of the accounts, we must consider
the need to open supplementary accounts or subaccounts that allow us to have better
control of a collective account. A clear example of this is a company that has 50
clients; the general ledger only records the general movements of the collective account,
but surely he will open an account in the name of each client in order to keep
a much tighter and safer control.

When we carry sub-accounts of a collective account, the journal entries are

The major auxiliaries or sub-accounts are transferred; in these, a movement is obtained that
Accumulate the movements of the period for that subaccount and at the end, it is transferred to the
collective major account, which only shows the balances of the movements that have been
registered in the subaccounts.

Account or ledger schemes

Broadly speaking, the ledger allows us, in addition to tracking the trace of the
transactions of the entity in a much more transparent and individualized way
accumulate the movements of each period with the sole objective of obtaining the balances

To do exercises or determine the result of one or more operations in

in the form of notes, the so-called 'T' accounts or ledger account diagrams are used, which
they represent an account, also allocating the space on the left side to the debit and
the right side to have.

For the "T" or ledger account schemes, it is not necessary to allocate a sheet to each
count or simply an appropriate space, depending on the amount of
operations that will be recorded.

Example 1: Purchase of a Television in cash for $3,000.00, on May 15.

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Example 2. A supplier was paid by check the amount of $2,000.00 on the 13th of
September.

Exercise 1
On January 1, 2019, the entity called 'First Semester' begins a new period.
of operations showing the following balances:
Banks 65,000
Capital 100,000
Warehouse 30,000
Suppliers 15,000
Clients 40,000
Documents payable 15,000
Organization expenses 10,000
Benefits of exercise 20,000
Office equipment 9,000
Taxes payable 4,000

From this date to the last day of the month, carry out the following operations:
Transfer for the profit of the previous year.
2. Payment by check, $2,000 for insurance premium to insure the goods that
they are in the warehouse.
Clients are charged $1,500.
4. Merchandise is purchased for a cost of $20,000, the transaction is conducted by paying with a check.
$12,000. For $3,000, it grants us credit and for the difference we sign a promissory note.
We paid $3,500 by check to the suppliers.
A truck is purchased for $45,000 to deliver goods. The operation
50% in cash and 50% on credit.

Exercise 2

On January 1, 2019, a new fiscal period begins for the entity called 'Sports',
presenting the following balances:
Banks 80,000
Clients 30,000
Capital 100,000
Office equipment 50,000
Documents payable 10,000
Suppliers 40,000
Usefulness of exercise 70,000
Warehouse 60,000

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From this date until February 28 of the same year, perform the following operations:
Transfer for the profit of the previous fiscal year.
2. Purchase of goods worth $15,000.00 the transaction is made: $7,000.00 in cash,
$5,000.00 on credit and for the difference we signed a document for 30 days.
$1,000.00 for the electricity bill, $800.00 for the phone, and $3,000.00 for the rent are paid by check.
from the local.
4. Goods are sold for $80,000.00 with a cost of $30,000.00. The operation is 60%.
in cash and 40% on credit.
5. An insurance policy is taken out to protect the office equipment, and the premium of $5,000.00 is paid.
with a check.
6. $10,000.00 is paid to the suppliers by check.
7. A mortgage loan of $100,000.00 is obtained, the incurred expenses amount to
$10,000.00, amount that is deducted by the mortgage company. The difference is deposited in
the bank.
Merchandise worth $150,000.00 is purchased, and the transaction is paid by check.
$60,000.00, for $20,000.00 we deliver a calculator that cost us
$15,000.00, for $50,000.00 we sign a document for 24 months and for the difference they grant us
credit.
9. Salaries are paid to employees for $20,000.00, deducting $2,000.00 for taxes.
the difference is covered with a check.
10. Sale of merchandise at $120,000.00, with a cost of $70,000.00, the operation is
$40,000.00 in cash that is deposited in banks, for $10,000.00 sign a
A 60-day document for $60,000.00, we received a truck for merchandise delivery.
and for the difference we grant credit.
A document for $10,000.00 is paid with a check.
Certain taxes that correspond to the entity and are specific to the month of July amount to
$8,000.00 and it will be paid next month.
13. The newspaper and cardboard accumulated are for sale for a total of $900.00.
14. A loan of $8,000.00 is made to an employee. This amount will be deducted.
for 5 fortnights.
On February 17, the taxes mentioned in point 12 are paid by check.
16. The payroll amounting to $20,000.00 is paid by check. $2,000.00 is deducted from
taxes and $1,600.00 to the employee to whom the loan was made.

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Exercise 3

On January 1, 2018, the business known as 'Analytical or Detailed' began its

operations with the following balances:
Banks 42,000
Capital 90,000
Office equipment 31,000
Suppliers 54,000
Inventory 71,000

From this date until December 31, 2018, the following operations were carried out:
Purchase of $75,000 of merchandise. A promissory note is signed for the total.
2. Settlement with freight check for the previous purchase. These amount to $3,000.00.
3. Sale of 80% of the merchandise from items 1 and 2, for $93,000.00, 50% in cash and 50% on credit.
credit.
4. The following concepts are covered with cash:
Salaries 10,000.00
Commissions 12,000.00
Light and phone 2,500.00
Rent 15,000.00
Light 1,000.00
5. Credit acquisition of $36,000.00 in merchandise.
As of December 31, the final inventory amounted to $122,600.00.

Exercise 4
On March 15, 2018, the entity named "De Segunda Mano" was acquired.
starting its operations simultaneously with the following balances:
Inventory 39,000
Suppliers 30,000
Office equipment 22,000
Merchant credit 19,000
Capital 70,000
Banks 20,000
As of December 31, 2001, the date of closing operations, the following had been carried out
transacciones:
Purchase of $93,000.00 of merchandise: 50% credit and 50% signed a note.
2. A check is used to settle an invoice for the shipping of the previous goods. The payment is for
$2,500.
The supplier grants a $3,000.00 discount.
10% of the referred purchase is returned as mentioned in the three previous points, due to being
defective.
5. It is sold for $100,000.00 the 90% of the goods from points 1, 2, 3, and 4: 60% in cash,
15% with a promissory note and credit is granted for the difference.
Various administrative expenses are settled in cash for: $34,400.00.
From the sale in point 5, they return 15%.
A 5% discount is granted, in relation to points 5 and 7.
9. Credit purchase of $30,000.00 of merchandise
10. A promissory note for $20,000.00 is signed to the bank. The difference is applied to the checking account.
The final inventory is $88,622.5.

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Balance Sheet or Financial Position Statement. Concept

The financial position statement shows the situation in monetary units.

financial status of the economic entity on a specific date, hence it is said to be a
static state. Its purpose is to show the economic resources, the rights
what creditors have and the ownership interest that shareholders possess
or owners. Therefore, the financial situation is represented by the relationship that
they have assets with liabilities and equity.

Active Equal Passive

Capital

Elements that make it up:

Before mentioning the elements that make up a balance sheet,

we specify the way it should be presented. It contains three sections:
header, body, and footer.

In the header, we note the name of the entity that provides the information.
financial; likewise, that of the financial statement we are referring to and the date of
which is presented.

In the body, we include the list of accounts grouped into assets, liabilities, and equity.
accountable, seeking a certain order in the use of indentations and columns.

At the bottom, we cite the names, signatures, and positions of those who prepared the information.
financial; that is, of the accountant and the person responsible for the business management
(legal representative, director or general manager). In addition, we include the notes to the
financial statements.

Now, the elements that make up the balance are assets, liabilities, and capital or
accounting heritage.

Asset, liability, and equity

The asset. It is composed of the goods and rights that belong to an entity.
economic, such as cash, accounts receivable from customers, inventories, properties
furniture and belongings that have monetary value.

Liabilities. Represents the debts and obligations of the economic entity and is
composed of the sum of money owed to suppliers, banks, creditors

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various and some provisions that may be established, for example: for the payment of
taxes, bonuses, etc.

The capital. It is represented by the ownership that shareholders have.

owners in the economic entity or, in simpler terms, by the difference
between the assets and liabilities of the economic entity.

The statement of financial position has three basic elements that are connected by a
fundamental relationship called accounting equation, which expresses the balance or
balance between the assets and the sum of the liabilities plus the capital

Assets = Liabilities + Equity

100,000 = 40,000 + 60,000

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Forms of presenting the balance sheet

There are two ways to present the balance, which correspond to the first two.
formulas exposed before:

a) A = P + C

And it is called a form of account, whose arrangement is as follows:

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b) The one that corresponds to the formula A–P = C and is known as the reporting formula:

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Income statement or profit and loss statement

Concept

Document that shows the results obtained by the company in a certain

period (generally one year) as a consequence of its operations, and its result
final reflects a profit or a loss in that period.

In the entity's operations, there is a very clear distinction between revenues,

costs and expenses and thus their results must be presented. The income is the
amounts received by the entity as a consequence of its operations. The costs
and expenses, on the contrary, are the amounts required to achieve the objective.
of their activities.

The income statement is a dynamic statement, so its figures are expressed in

cumulative form over a specified period, generally no more than one year.

The profit or loss shown in the income statement modifies the equity of
the owners or shareholders (capital), the first increasing it and the second
reducing it.

Components of the income statement

Both in purchases and sales, there can be discounts and returns. For
For example, a good customer receives a discount on the selling price due to the
importance of their operations; and another customer may return part of what was purchased
for being defective or not in accordance with your order.

Due to this, in order to determine the usefulness in goods both must be taken into account
purchases like sales in net quantity, that is, subtracting both the discounts.
like the returns.

The utility in goods, which is also referred to as gross utility, does not
it represents the net increase in capital, as it is modified by the following
concepts:

a) Decreased by selling expenses, that is, salaries and commissions to salespeople,

advertising and promotion expenses, all kinds of store expenses, and generally,
expenditures made with the purpose of selling.

b) Decrease due to administration expenses, that is, what implies the management of
business, such as management and accounting salaries, stationery and office supplies,
and in general all the expenses caused by the office, such as its rent, lighting,
telephones, telegraphs, mail, equipment depreciation, etc.

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 c) Increased by the products and decreased by financial expenses. These
concepts do not come directly from transactions with goods, but are
incidental to the business, and are represented by interest earned and paid,
discounts on purchases and sales for early payment, punishment of bad accounts and, in
general, for everything that comes from the handling of money, that is, the compensation for the
use of credit.

d) Increased with the products and decreased with various expenses, that is, all
those that come from transactions with values that, although they appear in the
accounting, in reality, does not form part of the main business of the company, rents and
expenses on rented buildings, dividends on shares and bonds held
company.

e) After carrying out all these operations, the net utility is determined.
obtained, or the increase to capital, which in some cases could be a net loss.
decrease of said capital.

Formulas:

To determine net sales, returns on sales are deducted, and

discounts and reductions on sales, on total sales.
To calculate the total purchases, those of goods for the period are considered plus
the purchase expenses.
To know the net purchases, the result of the total purchases minus
returns on purchases, and discounts and reductions on purchases.
The initial inventory plus net purchases results in the merchandise.
available to sell less final inventory, results in cost of sales.
To calculate the gross profit, net sales are taken into account minus the cost of
sales.

Classification of utilities

It is the combination of the concepts that make up the income statement.

income statement.

Sales minus cost of sales equals gross profit.

Gross profit minus selling expenses equals profit on sales.

Profit on sales, less administrative expenses plus financial products

Less financial expenses equals operational profit.

Operating profit plus diverse products minus diverse expenses is equal to

net profit.

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The income statement (appendix 1) is known as a form of reporting, or by deductions,
and offers the advantage of showing the different types of partial results obtained
before determining the net utility, this being the most commonly used form.

There is another means of presentation, called balanced form or statement.

(annex 2) in which the expense concepts are placed on the left and on the right the
product concepts, but which is not often used due to a lack of
information about the various concepts of utility.

Relationship with the balance sheet

The relationships or points of coincidence between the income statement and the balance sheet
son

1. The final inventory of goods appears in both statements; in the income statement,
as an element to determine the cost of sales, and in the balance sheet, as an item of
active.

2. The net profit is also an item that appears in both documents: in the statement
of losses and gains, as the final result of operations, and in the balance sheet, as
accumulation to the original capital to determine the current capital.

Trial balance

Concept

Accounting document that aims to record the sum of movements and balances,
checking whether the double-entry theory was observed. It can be developed in
four or six columns (annex 3).

The preparation of the trial balance allows us to confirm that it has been
the records have been successfully completed and, if applicable, detect possible errors that may arise
they have presented in the process and correct them in time to prepare correctly the
financial statements.

With the above, the second part of the logical procedure that we established for the
The record of operations would be defined as follows:

Calculation of trial balance

Preparation of closing entries

Preparation of the closing trial balance

Preparation of financial statements

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Annex 1

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Annex 2

Annex 3

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The control of goods

In sales transactions, there are always two prices, the selling price and the buying price.
cost
The selling price is the one at which the transaction is agreed upon with the client. The price of
cost represents the investment that the company made for the sold item. The difference
between the two prices originates the result of the operation, which can be the profit,
loss or zero result if both prices are the same.
At the time of sale, the selling price is known, but the
cost price. If this is not known, the cost of goods sold cannot be recorded.
operation and its result cannot be determined.
When it is not possible to know the cost of each merchandise or product, or it is not practical or
economic manage the product cost due to its low values and high volumes of
sales operations, inventory comparison systems are used; such is the
case of stores, retail outlets, self-service stores, restaurants,
etcetera.
When it is possible to know the cost of each merchandise or product, or it is practical and
economically manage the cost per product, the inventory system can be applied
perpetual. In some situations, the cost can be known, but it would not be practical or
economically implement a perpetual inventory system, as in the case of
retail sales stores, or supermarkets, unless there are means of
electronic processing that enables its execution. The comparison system of
inventories have two variants: the general merchandise method and the method
analytical or detailed.
To determine the cost of goods sold in these two variants, they are summed up.
the purchases to the initial inventory and the inventory is subtracted

final. This method has the drawback of determining the cost of

Sales are generally made at the end of the year, when an inventory is taken.
physical at the end of the year; therefore, there is a lack of information relative to the
cost of goods sold and the results of the company's operations.
Another drawback is that the result of the sales is known globally by the
total of goods sold. Management requires individual information.
and timely to set appropriate selling prices and thus successfully lead the company.
Finally, losses of goods due to shrinkage, theft, or cannot be detected.
subtractions of any nature since there is no information about the
inventory stock that allows timely awareness of these facts.
In the perpetual inventory system, the cost of goods sold is obtained
individually, multiplying each unit sold by its particular cost,
adding each of them afterwards.

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This method has the advantage that the cost of goods sold is obtained
generally on a monthly basis, being able to determine it daily if necessary,
since its calculation is individually by product or type of merchandise.
Inventory comparison system
As noted, the inventory comparison system has two methods, the
of general merchandise, or global account, and the analytical or detailed method.
General Merchandise Method
The general merchandise method is also referred to as the global account method, and it is managed
through a single account for recording the buying and selling operations, which
has the following movements:

General merchandise
Cargoes Fertilizers
1. Inventory at the beginning of the period at price of 1. Amount of goods sold
cost. during the exercise at selling price.
Purchases during the period at cost price.
3. Returns and discounts on sales obtained during the fiscal year at price of
exercise at selling price. cost.

Freights Fertilizers
Initial inventory 100,000 4. Discounts on purchases 18,000
2. Gross purchases 500,000 5. Returns on purchases 30,000
3. Freight and rights 60,000 6. Sales 1,000,000
7. Discount on sales 40,000
8. Returns on sales 70,000
Total 770,000 1,048,000
770,000
Balance before interest. 278.00
Final inventory record 180,000
Final balance (gross profit) 458,000

The account has charges of $770,000 and credits of $1,048,000, resulting in a balance
creditor of $278,000; this represents a mix of assets and results because
it contains transactions at cost price and at sale price. To separate the results
from the assets, it is required to include the ending inventory that up to this moment is
unknown.
Let's assume that the final inventory for the period has a value of $180,000 at price of
cost. The following entry is made:
Inventory of goods 180,000
General goods 180,000

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The new balance of the general merchandise account, which is $458,000, represents the
gross profit obtained as a result of the operations of the period, becoming
at this moment in the income statement.
Exercise: Prepare the income statement to verify if this gross profit is
correct.

Analytical or detailed method

The analytical or detailed method provides better information since, as

as the name indicates, the analysis is based on the use of a special account intended
to each classification of the purchase and sale operation. In general, in the handling of the
In the operation of buying and selling goods, the following intervene: inventories, purchases, sales.
The analytical classification of the accounts is shown as follows:

Inventory Net purchases Net sales

Initial inventory Gross sales
Final inventory 2. Returns on purchases 2. Returns
Discounts on purchases about sales
4. Freight and import duties, 3. Discount on
customs expenses, commissions of sales
agents, transports, etc.

The movement of the accounts is as follows:

Inventory of goods
Cargos Fertilizers
1. Inventory of goods at cost price as of
start the exercise.

The balance of this account must be debit and has no other movement during the year.
represents the total investment in merchandise inventory at the beginning of the fiscal year.
To record the cost of net purchases, the following accounts are used:

Gross purchases
Freights Fertilizers
Import of supplier invoices
for goods purchased at cost price.

The balance of this account must be debit and represents the gross purchases that have been
completed. It does not represent the net purchases because it lacks the deduction of returns.
about purchases and discounts that decrease the amount; it must be registered for
separated in this method which is analytical and requires detailed information.

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 Returns on purchases
Charges Fertilizers
Cost of the merchandise returned to
invoice price from suppliers.

Discount on purchases
Cargoes Fertilizers
1. Discounts or reductions obtained on
purchases that decrease the value of the
supplier invoices. Generally, they
obtained by purchasing volume or by
some special concession.

The previous accounts are of a credit nature, that is, they must have a credit balance.
and decrease the amount of the purchase account in order to obtain the purchase balance
netas.
Expenses on purchases
Freights Fertilizers
Import of freights and rights of
importation, customs expenses, commissions of
agents, haulage, etc., that originate the
merchandise purchased.

The balance of this account is of a debit nature and represents the expenses on the
purchases that have been made from the moment the supplier ships until
that the merchandise is received in the entity's warehouses.
The cost of goods purchased is composed as follows:
Purchases xxx
Less:
Returns on purchases xxx
Discount on purchases xxx xxx
Net purchases xxx
More:
Expenses on purchases xxx
Cost of net purchases xxx

The following accounts are used to record net sales:

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 Net sales
Freights Fertilizers
Total amount of the invoices that support the
merchandise sold.

The balance of this account is of a credit nature and represents the total gross sales that
it has made. It does not represent net sales because it lacks the deduction of returns from
merchandise and discounts on sales, which decrease the amount of this account;
They must register separately for this method.
Returns on sales
Freights Fertilizers
Value of the merchandise returned by customers
at the selling price indicated on the invoices.

Discount on sales
Cargoes Fertilizers
Discounts on sales granted to the
clients. Generally granted based on volume
for sale or some special concession or strategy
marketing.

The two previous accounts are of a debit nature, meaning they must have a balance.
debtor and decrease the amount of the gross sales account. The sum of the accounts
of gross sales, returns on sales and discounts on sales, represent the
net sales.
Therefore, net sales are comprised as follows:
Sales xxx
Less:
Returns on sales xxx
Sales discounts xxx
Net sales xxx

The final inventory has not been considered in any of the accounts addressed.
previously. At the end of the exercise or period in which it is desired to determine the cost of
the sold will require a physical inventory to be valued at price of
purchase (cost), in order to determine its amount.
With the final inventory, all the elements are available to determine the cost of sales.
applying the following reasoning:

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The initial inventory is added to the net purchases and this sum is subtracted from the
final inventory, obtained by difference the cost of goods sold.
To illustrate the above, the following shows how to determine the cost of
sales under this method:
Cost of goods sold
Initial inventory xxx
More: net purchases:
Gross purchases xxx
Less:
Returns on purchases xxx
Discounts on purchases xxx xxx
Less:
Final inventory xxx
Cost of sales xxx

Cost of sales
Loads Fertilizers
Transfer of the amount from Transfer of the amount of the
initial inventory. returns on purchases.
2. Transfer of the amount of the 2. Transfer of discounts
gross purchases. about purchases.
3. Transfer of the amount of the 3. Amount of the final inventory of
expenses on purchases. merchandise, which must be loaded onto
the inventory account of merchandise.

The account balance represents the cost of goods sold determined under
this method.

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Exercise 5

On January 1, 2018, the entity called 'School Without Classrooms' began its operations.
At the end of their exercise, on December 31, 2018, their accounting books showed the
following balances:

Banks $150,000.00
Capital 150,000.00
Clients 120,000.00
Ventas 200,000.00
Suppliers 150,000.00
Taxes payable 75,000.00
Warehouse 80,000.00
Cost of sales 90,000.00
Debtors 15,000.00
Operating expenses 120,000.00

Required:
a) Prepare a trial balance.
b) Integrate balance sheet.
c) Income statement form.

Exercise 6

On March 1, 2018, the entity called 'Plastic Paper Factory' started its operations.
December 31 of the same year, the balances presented in the general ledger are:

Sales $600,000.00
230,000.00
Operating expenses 180,000.00
Banks 150,000.00
Creditors 40,000.00
Cost of sales 200,000.00
Debtors 70,000.00
Suppliers 95,000.00
Capital 200,000.00
Office equipment 30,000.00
Taxes payable 25,000.00
Warehouse 120,000.00
Accumulated depreciation of office equipment 3,000.00
Receivables 60,000.00
Mortgage payable 97,000.00
Advance payments 20,000.00

Required:
a) Prepare a trial balance.
b) Integrate balance sheet.
c) Prepare income statement.

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Exercise 7

On May 24, 2018, the entity called 'Dulces de Dulce' began its operations.
to complete its exercise on November 30, 2018, the balances it holds are as follows:

Banks $130,000.00
Sales 560,000.00
Clients 210,000.00
Cost of goods sold 195,000.00
Taxes payable 20,000.00
Machinery 150,000.00
Debtors 60,000.00
Operating expenses 120,000.00
Creditors 50,000.00
Other expenses 10,000.00
Warehouse 105,000.00
Advance payments 70,000.00
Suppliers 200,000.00
Accumulated depreciation of machinery 15,000.00
Office equipment 100,000.00
Other products 15,000.00
Accounts payable 100,000.00
Organization expenses 50,000.00
Accumulated depreciation of office equipment 10,000.00
Accounts receivable 175,000.00
Accumulated amortization of expenses
organization 5,000.00
Mortgage payable 150,000.00
Capital 250,000.00

Required:
a) Prepare a trial balance.
b) Integrate balance sheet.
c) Prepare income statement.

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Exercise 8

The entity called 'Manual Electronics' began its operations on June 1, 2001, when
At the end of its exercise, on May 31, 2001, it shows the following balances:

Capital $ 1,000,000.00
Bank 500,000.00
Sales 3,500,000.00
Clients 1,200,000.00
Accounts receivable 500,000.00
Suppliers 1,700,000.00
Warehouse 450,000.00
Cost of sales 1,000,000.00
Creditors 200,000.00
Office equipment 300,000.00
Debtors 120,000.00
Operating expenses 850,000.00
Building 2,000,000.00
Taxes payable 470,000.00
Advance payments 95,000.00
Accumulated depreciation of equipment
office 70,000.00
Transportation equipment 550,000.00
Box 10,000.00
Long-term payables 750,000.00
Installation costs 200,000.00
Accumulated depreciation of building 30,000.00
Accumulated depreciation of equipment
transport 110,000.00
Accumulated amortization of expenses
installation 20,000.00
Discounts and returns on sales 75,000.00

Required:
a) Prepare a trial balance.
b) Integrate balance sheet.
c) Income statement form.

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Exercise 9

On May 24, 2002, the entity named 'Dulce Toy Store' began its operations.
From this date until December 31 of the same year, María carries out a series of operations.
after which it has the following balances:

Taxes payable $6,000.00

Clients 40,000.00
Ventas 380,000.00
Estimated liability 10,000.00
Installation costs 15,000.00
Other products 10,000.00
Land 800,000.00
Machinery 70,000.00
Accounts payable 90,000.00
Long-term bank creditors 80,000.00
Creditors 30,000.00
Box 20,000.00
Financial products 4,000.00
Cost of sales 140,000.00
Employees and staff 30,000.00
Suppliers 45,000.00
Organization expenses 15,000.00
Operating expenses 270,000.00
Warehouse 50,000.00
Documents payable short term 15,000.00
Advance collections 18,000.00
Other expenses 7,000.00
Shares and values 10,000.00
Insurance 14,000.00
Mortgage creditor 600,000.00
Transport equipment 130,000.00
Banks 60,000.00
Building 500,000.00
Financial expenses 11,000.00
Debtors 10,000.00
Office equipment 45,000.00
Security deposits 20,000.00
Accounts receivable 16,000.00
Capital Determination

Required:
a) Prepare a trial balance.
b) Integrate balance sheet.
c) Income statement format.

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Exercise 10

Relate both columns.

A warehouse, commercial, a family or a) The financial statements
a hospital is an example of... b) The field of action of
( ) Accounting Bachelor's degree in Accounting
( ) From financial control are obtained: c) Entities
( ) The preparation, review, analysis, and d) Balance sheet
interpretation of the states e) Control and information
financials constitute: Finance
It is the obtaining and application of the g) It is a means of control and infor-
material resources: information

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