NATIONAL INSTITUTE OF SAN MIGUEL TEPEZONTES

MODULE 1.1 SYLLABUS MANAGEMENT OF INFORMATION AND ACCOUNTING RECORD

START DATE JANUARY 31 TO APRIL 29, 2022
PROFESOR: OSCAR ARMANDO ARÉVALO PORTALES
THEMES
1. Introduction to Accounting
a) Definitions of Accounting
b) Branches of Accounting
c) Objectives of Financial Accounting
d) Importance of Financial Accounting
e) Characteristics of Financial Information
f) Users of Financial Information
g) Basic Concepts of Financial Accounting
h) Legal aspects of Accounting
The Bill
3 Accounting Equation
4 Record of Transactions in the Accounting Books
i) Journal Book
ii) Ledger
iii) Preparation of Trial Balance
iv) Adjustment Records
v) Preparation of Adjusted Trial Balance
vi) Financial Statements

DEVELOPMENT OF THE TOPIC

INTRODUCTION TO ACCOUNTING
Origin of accounting

Accounting has been present in the lives of men for thousands of years, it was
used in a more rudimentary way in great civilizations like Egypt or Rome,
but accounting as we know it today had its origin in the publication in
Italy from the work "Summa de Arithmetica, Geometría, Proportioni e Proportionalita"
Luca Pacioli, who dedicated himself to describing accounting methods for merchants
Venetians, commercial uses, contracts and practices of interest and exchange; this
The document established double-entry accounting, the precursor to what exists today.
known as 'debit and credit' in accounting jargon. However, since the ancient
Italian republics and microstates were the great promoters of trade in the centuries.
Previously, these teachings were adapted and modified with the passage of time, without
lose its original essence.

The ItalianLuca Pacioli, recognized as The Father of accounting and bookkeeping

books was the first person to publish a work about thedouble entry, e
he introduced this discipline in Italy.
The modern profession of the chartered accountant originated in Scotland in the 19th century.
Accountants often belonged to the same associations as lawyers,
who used to offer accounting services to their clients. The accounting
early modern had similarities to what is now known as accounting
forensic. Accounting began to transform into an organized profession in the
19th century, with local professional organs in England that merged to
establish the Institute of Chartered Accountants in England and Wales in 1880
Definitions of Accounting
1. Control and record system of expenses and income and other operations
economic activities carried out by a company or entity.
2. Part of the economy that studies these systems or the different items that
they reflect the financial movements of a company or entity.
3. Accounting is based on the need for information.
accurate, timely, and complete financial information, with documents and records that
demonstrate the processes carried out by an entity and the results obtained
that reflect their financial situation. (Elías Lara Flores)

Accounting as Science, Technique, and Art

Accounting in its concept of science is a set of ordered principles.
systematically refers to the way of recording and controlling all the
administrative operations of the economic goods, wealth, or profits that one possesses
an individual, social, public or private person.

In the concept of art, it is a set of practical rules derived from the principles and
truths of science, which aim for the recording, quantification, and control of the
economic operations of a company.

Accounting is the art of recording, classifying, and summarizing in a meaningful way and in
monetary terms, the transactions and events that are, at least in part,
of a financial nature and to interpret the subsequent results.–American Institute of
Certified Public Accountants-1941.

Financial accounting is a technique that is used to produce systematically and

structurally quantitative information expressed in monetary units of the
transactions carried out by an economic entity, and hundreds of economic events
identifiable and quantifiable factors that affect it, in order to facilitate the various
interested parties to make decisions regarding that economic entity."–Institute
Mexican Public Accountants.
Branches of Accounting
Depending on the type of users and the purpose pursued with the financial information,
we can talk about four branches of accounting:
a) Managerial Accounting: This includes the development and interpretation of the
Accounting information (timely and reliable) for decision making is usually
for internal use of the management of each company. Generally, the data that is
provide are much more detailed than those prepared for external use.
b) Tax Accounting: It involves, tax or fiscal accounting focuses
exclusively to the control and oversight of tax commitments of a
company. It is always governed by the rules established by the laws
nationals.
c) Government Accounting: this refers to the information system that
it is used in the public sector. Public accounting ensures that the position
and the financial performance of the institutions in this sector is established
within a budgetary context.
d) Financial Accounting: Financial accounting is one of the most variants
extended and has direct contact with many sectors. Broadly speaking, it
it deals with the process of collecting, classifying, recording, and reporting on the
operations in monetary terms, for external use, which is usually given by
the middle of the famousfinancial statements.

The objectives of financial accounting

Through the previous definitions, some characteristics of the

financial accounting, as well as its objectives.

Fernández (p. 31) mentions the following:

1. Economic Events Record

2. Accountability and control of accounts and results
3. Economic-financial information for decision making

Information Users Thus, the nature of the information users

financial depends on the type of data being analyzed. Each type of user requires.
specific information, according to the needs for your decision making or the process
relevant financial one. Users can be identified as:
Investors
They seek specific information that helps them calculate the risk or
performance of its operations, for example: the ability of a company to pay
dividends.
Clients
It is usually a long-term engaged consumer who is interested in data.
about the continuity of an organization.
 Owners or partners
They expect exact results about their business to know their profits and the
performance of your company.
Employees
The labor unions and the employees themselves need information about
financial situation of the company.
Public Administration
Government entities primarily interested in business development and
tracking of workers for the distribution of own resources.
General public
Not all people consult financial information but it is a fact that all are
directly or indirectly impacted by it may want to be informed about it
labor sector and the companies in it.

The qualitative characteristics of financial information are:

• Comprehensibility.
• Relevance.
• Materiality or relative importance.
• Reliability.
• Essence over form.
• Prudence.
• Integrity.
• Comparability

Basic Concepts of Financial Accounting

i) Assets
ii) Liabilities
iii) Heritage
Costs and expenses
v) Income

Now let's see what each previously mentioned concept means

Assets, from an accounting perspective, represent goods, rights, and others.
resources economically controlled by the company, resulting from past events,
from which the company is expected to obtain profits or economic returns in
the future.
The asset is classified as follows:

· · Current Assets: these are assets that are expected to be consumed or sold within
the twelve months that a normal cycle of the operation of the business lasts.
• Non-Current Assets: Unlike current assets, these are assets that will not have purposes.
of negotiation. They remain for more than a year, serve to generate the income, such
such as machinery or computing equipment.

The liabilities consist of the debts that the company has, recorded in the balance sheet.
situation, it includes the current obligations of the company that originate from
past financial transactions.

· Current Liabilities: Debts and obligations due within a period of less than
Year. Suppliers, documents payable, various creditors, pending expenses.
payment, taxes pending payment.

· Non-current liabilities: debts and obligations due in a period greater than

one year. Mortgages payable or mortgage creditors, long-term payables
deadline.

HERITAGE:
· · It represents the resources that partners or owners have invested in their
company; (The initial contribution of the partners and the capital increase made by the
partners according to public deed.
· · Authorized Capital: Represents the capital that can be reached, it is a goal.
clear for the partners.
· Subscribed Capital: It is the capital that the company is currently using.
carry out its different operations (circulating capital)
· · Subscribed and Paid Capital: Represents the capital that the company has already utilized and was
paid.
· · Surplus: they are the profits obtained in the accounting periods, as a result
from commercial operations, it includes reserves and undistributed profits.

· Earned Surplus: It is the case of companies whose capital is formed by

actions and these are revealed or sold at a higher price; and earnings to be distributed, obtained
in previous exercises or in the last exercise performed.

· · Reserves: They represent the values that societies designate from their
utilities, in each accounting exercise, to protect the company's assets.
· · Legal and Mandatory Reserve: 10% is settled annually, until completed
50% of the share capital.

· · Statutory Reserve: Destination of the beneficiary whose annual amount must be

set forth in the company's statutes, taking into account its own considerations of
internal functioning.
·
· · Utility of the Period: Represents the net profits to be distributed among
the partners, obtained in previous years or in the current accounting period,
liquidated after calculating the reserves and taxes of each accounting period;
Value of the profits settled annually, payments and distribution of the profits to
the partners.

· · Capital Surplus: Represents extraordinary activities (ordinary turn)

of the business)

INGRESOS:
An income is a real flow from the production and marketing operations of
goods, provision of services or other similar operations that are framed in
the economic activity of a company.

Among possible examples of income, there is one derived from the sale of
products, complementary yields to the previous within the commercial process, the
production that the entity carries out for itself or the disbursement of the provision
overestimated or the application to its purpose of that which was at its time
gifted.

Operational Income: They originate from the Sale of goods and/or Provision of services.
Services, these cases must correspond to the Main Activity of the company.
The Accounts that are part of this Subgroup are only: Sales, and Provision
of Services.
· · Non-Operating Income: It is the cash inflow coming from
activities and transactions that do not correspond to the main business of the company. The
Most common accounts are: Interest Earned (Interest Income), Income from
Commissions, Gain on Sale of Asset, among others.
GASTOS:
They represent the cash outflows from both the normal operations of the company and
extraordinary; and that under no circumstances can be taken or confused within the category of
Costs, Assets, or other subgroups that by their nature include
special expense items.

· · Operating Expenses: are all those disbursements incurred by the company

for its development and normal and consequent operation. These are classified or
divided into: Sales Operating Expenses, and Administrative Operating Expenses or
Financial.
· · Sales operating expenses: These are the expenses corresponding to
sales department, meaning they are directly or indirectly related to the
Sales, among the main accounts are: salaries for salespeople, salaries for staff
dispatch worker, packaging expenses in sales, patent, value added tax
VAT, etc.
· · Financial expense: They are all the other normal and necessary expenses of the
company, but that do not relate to sales. The main accounts are: salary
to the company's staff, legal expenses, professional fees, public services,
advertising, and propaganda, income tax, asset depreciation, etc.

· · Non-operational expenses: It includes the sums of money paid and/or

caused by expenses not directly related to the exploitation of the main object
of the economic entity, the most common accounts are Loss on Sale of Assets, Notes
debit for check returns, etc.
COSTS:
It is represented by purchases of both goods for sale and raw materials.
first (Manufacturing Companies), as well as all accounts that affect
to purchases directly or indirectly affecting their value. The main accounts are:
purchases, returns on purchases, discounts on purchases, import expenses
customs expenses on purchases, etc.

Legal Aspects of Accounting.

Accounting, being a technique used by individuals or legal entities
They are subjected to legal norms that govern their operation. Depending on the
regulations that regulate it, we have 4 types of laws that must be complied with:
 a) Commercial Laws
b) Labor Laws
c) Tax Laws
d) Financial and Banking Laws
Within commercial laws, we have:
Commercial Code
ii) Commercial Registration Law
iii) Commercial Procedure Law
iv) General Direction of Registration Law
v) Law of the Superintendency of Commercial Obligations
vi) Law on the Constitution of Public Limited Companies
Mixed Economy

Within labor laws are:

a) Labor Code
b) Law of the Social Security Institute of the Armed Forces (IPSFA
c) Law on the Pension Savings System (AFP's)
d) Law of the Salvadoran Social Security Institute
e) Vocational Training Law (INSAFORP)
f) Constitutional provisions on work (articles 37 to 52 of the
Constitution

Within tax laws are

a) Income Tax Law
b) Law of Tax on the Transfer of Personal Property and the Provision of
Services
c) Tax Code
d) Law of NIT
e) Law on Real Estate Transfer Tax

Within banking and financial laws we have

a) Banking Law
b) LAW OF THE FINANCIAL SYSTEM FOR THE PROMOTION OF DEVELOPMENT
c) Law of the Social Security Institute of the Armed Forces (IPSFA)
d) Law of the Savings System for Pensions (AFPs)
e) Law of Credit Institutions and Auxiliary Organizations
f) Organic Law of the Central Reserve Bank