BASIC ACCOUNTING I

UNIT 1. -
INTRODUCTION.-

 Definition of accounting.- Classification of companies according to the commercial

code.- Financial reports.
 Mandatory records established by Bolivian legislation.- Accounting standards of the
National Technical Audit Council.- Generally Accepted Accounting Principles
(GAAP).
 The Accounting Equation and its transformations due to commercial transactions.

AIM

Analyze the importance and need to use Accounting in different companies, as the
language of business through records, standards and legal provisions.

SELF-PREPARATION

The student will independently solve the following practical exercises that will be
delivered as part of their evaluation.

INTRODUCTION TO ACCOUNTING

Every natural or legal person has to make decisions in a timely manner about the
distribution, investment of their resources or the evolution of their Assets in a certain
time. To do so, they require having economic and financial information. To satisfy these
needs, internal control is essential. and accounting records of commercial transactions
to provide information in accordance with Generally Accepted Accounting Principles
(GAAP), Accounting Standards (NC) issued by the National Technical Council for
Auditing and Accounting (CTNAC) of the College of Auditors of Bolivia and the
International Accounting Standards (IAS).

Rules

The Standard is a model or parameter and levels of action. A standard is established by

custom by common agreement, or by scientific, professional or governing bodies after
extensive observations, experimentation, research work, tests or approach.

Its purpose is to serve as a practical basis for the institution of procedures that ensure
the conformity of a group of people and provides a criterion and means of control over
the actions of professionals.

Accounting principles

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It is an accounting doctrine that serves as an explanation of current or current activities
and is a guide in the selection of procedures.

Accounting principles are concepts of ideas, conventions and generally accepted

standards or norms.

DIFFERENT DEFINITIONS OF ACCOUNTING:

 For Juan Funes O. “Accounting is an Information System, which is based on a

set of Principles, standards and technical Procedures that allow for the orderly,
complete and detailed recording of the economic and financial facts of business
Management, in order to issue the Statements. Financial: to then analyze and
interpret the Economic and Financial situation of the Company, which will allow
timely decisions to be made by internal and external users.”

 For Leandro E. Fowler Newton, Accounting, an integral part of the Entity's

information system, is the data processing technique that allows obtaining
information on the composition and evolution of the assets of said Entity, the
assets owned by third parties in its possession and certain contingencies. Said
Information should be useful to facilitate the decisions of the administrators of the
Entity and the third parties that interact with it, as well as to allow effective
surveillance of the resources and obligations of the Entity.

PURPOSE AND IMPORTANCE OF ACCOUNTING

Both the objectives and the importance of accounting are established by what can be
interpreted from the different modern definitions of it. The object is to obtain and
communicate economic and financial information to internal and external users
regarding an economic unit.

Internal Users
1. Owners and Partners
2. Directors and Administrators
3. Employees and Unions

External Users
1. New Investors
2. Financial entities
3. Suppliers and Creditors
4. Governments
5. General public

Consequently, the importance of accounting is implicit, since it is the most reliable

instrument on which different users of this economic and financial information will base
their decisions in a timely manner.

OBLIGATION TO KEEP ACCOUNTING

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Every merchant is obliged to keep accounting appropriate to the nature, importance and
organization of the Company, on a uniform basis that allows demonstrating the situation
of their businesses and a clear justification of each and every one of the acts and
operations subject to accounting, and the books and documents that support them must
also be kept in good condition.

BOOKS REQUIRED BY LAW

The books that every merchant must carry and their form of presentation according to
Art. 37 and 40 of the Commercial Code, They are:

 Diary book
 Ledger
 Books Purchase and Sale VAT
 Kardex Inventory
 Financial reports

GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

The National Technical Council for Auditing and Accounting (CTNAC), dependent on the
College of Public Accountants of Bolivia, through Accounting Standard 1, made the
professional community of the area aware of the current GAAP for the preparation of

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accounting information. These GAAP were proposed and approved at the VII Inter-
American Accounting Conference

The Generally Accepted Accounting Principles are the following:

1 Fundamental Principle or Basic Postulate.

Equity . The Financial Statements must be prepared in such a way that they
fairly reflect the different interests at stake in a farm or company.

2 General principles.

a. Entity. Financial statements always refer to an entity where the subjective or

proprietary element is considered as a third party. The concept of “entity” is
different from that of “person” since the same person can produce financial
statements for several “entities” that he or she owns.

b. Enconimics goods. The financial statements always refer to economic

assets, that is, material and intangible assets that have economic value and
are therefore susceptible to being valued in monetary terms.

c. Account Currency. The financial statements reflect the equity through a

resource that is used to reduce all its heterogeneous components to an
expression that allows them to be easily grouped and compared. This
resource consists of choosing a currency of account and valuing the assets by
applying a “price” to each unit.

Generally, the money that is legal tender in the country within which the
“entity” operates is used as the currency of account and in this case the
“price” is given in units of legal tender money.

d. Company in Progress. Unless expressly indicated otherwise, it is

understood that the financial statements belong to a “going concern”,
considering that the concept that informs the aforementioned expression
refers to any economic organism whose physical existence has full validity
and future projection.

e. Valuation at Cost. The value of the acquisition or production cost constitutes

the main and basic valuation criterion, which conditions the formulation of the
so-called “statement” financial statements, also corresponding to the concept
of “going concern”, which is why this standard acquires the character of
principle.

This statement does not mean ignoring the existence and origin of other rules
and criteria applicable in certain circumstances, but on the contrary it means
stating that if there is no special circumstance that justifies the application of
another criterion, “cost” must prevail. as a basic valuation concept.

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 On the other hand, fluctuations in the value of the currency of account, with
their consequences of corrective measures that affect or modify the monetary
figures of the costs of certain goods, do not constitute, likewise, alterations to
the expressed principle, but, in substance, They constitute mere adjustments
to the numerical expression of the respective costs.

f. Exercise. In ongoing companies it is necessary to measure the result of

management from time to time, whether to satisfy administrative, legal, fiscal
reasons or to meet financial commitments, etc.

DATE FOR PRESENTATION OF FINANCIAL STATEMENTS

According to Supreme Decree DS N.- 24051 of June 29, 1995, for the
purposes of payment of the Corporate Profits Tax (IUE); establishes the
following management closing dates according to the type of activities

31 de Marzo Empresa Industrial y Petroleras

Empresas Gomeras, Castañeras, Agricolas, Ganaderas y
30 de Junio
Agroindustriales
30 de Septiembre Empresas Mineras.
Empresas Bancarias, de Seguros, Comerciales, de Servicio y Otras no
contempladas en las fechas anteriores, asi como los sujetos no
31 de Diciembre
obligados a llevar registros contables y las personas naturales que
ejercen profesiones liberales y oficio en forma independiente.

g. accrued. The equity variations that must be considered to establish the

economic result are those that pertain to a fiscal year without considering
whether they have been collected or paid.

h. Objectivity. Changes in assets, liabilities and in the accounting expression

of net worth must be formally recognized in the accounting records, as soon
as it is possible to measure them objectively and express this measurement in
currency of account.

i. Realization. The economic results should only be computed when they

are carried out, that is, when the operation that gives rise to them is perfected
from the point of view of the applicable legislation or commercial practices and
all the risks inherent to such operation have been fundamentally weighed.

j. Prudence. It means that when a choice must be made between two

values for an asset item, the lower value should normally be chosen, or a
transaction should be accounted for in such a way that the owner's share is
lower. This general principle can also be expressed by saying “account for all
losses when they are known and all gains only when they have been
realized.”

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 k. Uniformity. The general principles, when applicable, and the particular
standards used to prepare the Financial Statements of a given entity, must be
applied uniformly from one year to the next. The effect on the financial
statements of any significant change in the application of general principles
and particular standards must be indicated by means of an explanatory note.

l. Materiality. When considering the correct application of general principles

and particular rules, one must necessarily act with practical sense. Situations
frequently arise that do not fit within those and that, however, do not present
problems because the effect they produce does not distort the general picture.
Of course, there is no demarcation line that sets the limits of what is
significant and the best criteria must be applied to resolve what is appropriate
in each case, according to the circumstances, taking into account factors such
as the relative effect on assets. or liabilities, in equity or in the results of
operations.

m. Exposure. The financial statements must contain all the basic and
additional information and discrimination that is necessary for an adequate
interpretation of the financial situation and economic results of the entity to
which it refers.

" THE CHECK "

ACCOUNT DEFINITION :

It is the name that is assigned in a methodical and systematic manner to a series of

transactions or operations that "have common characteristics, where the increases and
decreases suffered by a value or concept are noted, as a consequence of the
transactions or operations carried out by the business. . That is to say, account is the

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title that is assigned as a consequence of commercial events to those transactions
where concepts of the same nature intervene. The name assigned to the account must
give a clear idea of the value or concept to which the transaction refers with abbreviated
words that are easy to personify.

Example: Enter the name of the respective account

Chairs Car
Tables Van
Shelves Truck
Game of living Motorcycle
TV Wagon
Fax Micro
Etc. Etc.

Notebooks Brooms
Pencils Mops
Agendas Detergents
Concealers Air fresheners
Folder Soaps
Staples Garbage dumps
Etc. Etc.

Coffee Computer
Tea Printer
Soda Terminal
empanadas CPU
Cuñape Motherboard
Cake Etc.
Etc.

" THE PLAN OF ACCOUNTS "

DEFINITION OF THE PLAN OF ACCOUNT :

It is an official list where all the accounts, whether nominal, real or order, used by a
specific company, are shown coded and classified. The preparation and elaboration of a
plan of accounts is carried out according to the characteristics of each company.
Therefore, the account plan will be different depending on the activity of the company,
which may be a commercial, service, industrial company, etc., even between companies
of the same activity they could be different.

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CODING MECHANISMS
In the coding, the decimal numeric will be applied, for this it is necessary to create levels
in order to classify and identify the accounts.
1. First Level.- Assignment of the group with the main or party digit. The accounts
are; Assets, Liabilities, Equity, Income and Expenses.
2. Second Level.- Subgroup Assignment, Adding another number to the main digit.
The sub-accounts are Assets: Current and Non-current; Liabilities: Current and
Non-Current.
3. Third Level.- Assignment of the Parent account, Adding a new digit in relation to
the previous coding. The accounts are Active: Available, Required, Achievable,
Etc.
4. Fourth Level.- Assignment of the general ledger account, adding one more digit
to the previous one. The accounts are: Assets: Cash, Bank, Dpf, ETc
5. Fifth Level.- assignment of ledger accounts, one more digit is added to the
previous one. The accounts are Assets: Cash M/N, Bank M/N, Bank M/E, etc.
PLAN OF ACCOUNTS FOR A COMPANY

1. ASSET :
1.1. Current or Circulating Assets :
1.1.1. Available
1.1.1.1. Box
1.1.1.1.1. Box M/N
1.1.1.1.2. M/E Box
1.1.1.2. petty cash
1.1.1.2.1. Small Box M/N....
1.1.1.3. Bank
1.1.1.3.1. Bank M/N....
1.1.1.4. Savings bank
1.1.1.4.1. Savings bank M/N....
1.1.1.5. DPF
1.1.1.5.1. DPF M/N....

1.1.2. Credits or Demands :

1.1.2.1. Accounts receivable
1.1.2.1.1. Client
1.1.2.2. Documents receivable
1.1.2.2.1. Client
1.1.2.3. Tax credit (for settlement)
1.1.2.4. VAT to be recovered (at closing of management)
1.1.2.5. Tax advance
1.1.2.6. Advance to employee
1.1.2.7. Accounts receivable from employees
1.1.2.8. Staff loan
1.1.2.9. Interest receivable
1.1.2.10. Rents receivable
1.1.2.11. Commissions receivable
1.1.2.12. Other debtors

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 1.1.3. Of exchangeable or realizable goods :
1.1.3.1. Merchandise inventory
1.1.3.1.1. Merchandise
1.1.3.2. Merchandise in transit

1.1.4. Investments :
1.1.4.1. Holdings
1.1.4.2. Actions

1.2. Non-current or fixed asset :

1.2.1. Useful or tangible goods :
1.2.1.1. Land
1.2.1.2. Buildings
1.2.1.2.1. (-) Accumulated depreciation of buildings
1.2.1.3. Furniture and fixtures
1.2.1.3.1. (-) Accumulated depreciation of furniture and fixtures.
1.2.1.4. computing equipment
1.2.1.4.1. (-) Accumulated depreciation of computer equipment.
1.2.1.5. Vehicle
1.2.1.5.1. (-) Accumulated vehicle depreciation.
1.2.1.6. Machinery and equipment
1.2.1.6.1. (-) Accumulated depreciation of machinery and equipment.
1.2.1.7. Tools in general
1.2.1.8. (-) Cum. Depreciation Tools in general.

1.2.2. Intangibles :
1.2.2.1. Goodwill
1.2.2.2. Trademark
1.2.2.3. Patent
1.2.2.4. Copyright
1.2.2.5. Franchise right
1.2.2.6. Registered trademark
1.2.2.7. Key right

1.2.3. Deferred :
1.2.3.1. Interest paid in advance (or early)
1.2.3.2. Rentals paid in advance
1.2.3.3. Commissions paid in advance
1.2.3.4. Insurance paid in advance
1.2.3.5. Advertising and propaganda paid in advance
1.2.3.6. Land for future construction
1.2.3.7. Organization expenses
1.2.3.8. Pending operations

Note : The highlighted accounts and asterisks can also be registered in Current or
Circulating Assets, more properly or specifically in Deferred Expenses or paid in
advance in code 1.1.6.
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 2. PASSIVES :
2.1. Current or Short Term :
2.1.1. Accounts payable
2.1.1.1. Supplier X
2.1.1.2. Supplier Y
2.1.2. Document to pay
2.1.2.1. Supplier X
2.1.2.2. Supplier Y
2.1.3. Interest payable
2.1.4. Rents payable
2.1.5. Commissions payable
2.1.6. Salaries and salaries payable
2.1.7. Advertising and propaganda to pay
2.1.8. Insurance payable (occasional account)
2.1.9. Mortgage loans
2.1.10. Loans to Pay
2.1.11. bonus to pay
2.1.12. Settlement to pay
2.1.13. Contributions and withholdings payable:
2.1.14. Fiscal debit
2.1.15. VAT payable (at closing of Management)
2.1.16. Transaction tax payable
2.1.17. Income taxes payable
2.1.18. Interest charged in advance (or early)
2.1.19. Rentals collected in advance
2.1.20. Commissions charged in advance (advance from clients)

2.2. Non-current or long-term liabilities :

2.2.1. Mortgage payable
2.2.2. Bank loans
2.2.3. Documented loans
2.2.4. Provision for compensation
2.2.5. Forecast for bonus
2.2.6. Other pending operations

3. EQUITY OR ACCOUNTING CAPITAL :

3.1. Capital
3.2. Global adjustment to equity
3.3. Legal reserve
3.4. Accumulated results
3.5. Management result

4. INCOME :

4.1. Sales (Commercial Accounting)

4.2. Services Provided or Income from services (Accounting. of
Services)
4.3. Sales surcharge
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4.4. Freight on sales (credit balance - optional account)
4.5. Return on Inventory
4.6. Inventory Discount
4.7. Earned interests
4.8. Commissions earned
4.9. Earned rentals
4.10. Sale of waste
4.11. Gain on sale of fixed assets
4.12. AITB (credit balance)
4.13. Exchange difference (credit balance)
4.14. Inventory losses and failures (credit balance)

5. EGRESS :

5.1. Merchandise Inventory (Purchases)

5.2. Inventory Surcharge
5.3. Freight on Inventory (purchases)
5.4. Return on sales
5.5. Sales discount
5.6. Interest paid
5.7. Rents paid
5.8. Commissions paid
5.9. Insurance paid
5.10. Wages and salaries paid
5.11. Paid advertising and propaganda
5.12. Building depreciation
5.13. Depreciation of furniture and fixtures
5.14. Depreciation Computer equipment
5.15. Vehicle depreciation
5.16. Machinery and Equipment Depreciation
5.17. Miscellaneous expenses or General expenses
5.18. Losses on doubtful accounts
5.19. COST OF GOODS SOLD
5.20. Loss on sale of fixed assets
5.21. AITB (adjustment for inflation and possession of assets –
debit balance)
5.22. Exchange difference (debit balance)
5.23. Losses due to accidents
5.24. Utility expenses:
5.24.1. Water 5.24.6. Box (mail)
5.24.2. Light 5.24.7. Internet
5.24.3. Phone 5.24.8. Communication
5.24.4. sewerage 5.24.9. cable TV
5.24.5. Trash 5.24.10. ............................

5.25. Transaction tax

5.26. Stationery consumed or expense of stationery
5.27. Office supplies consumed or office supplies expense
5.28. Cleaning material consumed or cleaning material expense
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 5.29. Fines and penalties:
5.29.1. Value Maintenance 5.29.3. Delinquency Fines
5.29.2. Interest 5.29.4. Mul p/ Inc. Debt.
For.

5.30. Repair and maintenance of fixed assets

5.31. Inventory losses and failures (debit balance) *
5.32. Cleaning
5.33. Awards and incentives
5.34. Tea and snack service
5.35. Travel expenses and representation expenses
5.36. Surveillance payments
5.37. Spare parts and accessories
5.38. Professional fees
5.39. extra hour
5.40. Other taxes
5.41. Social positions:
5.41.1. CNSS 5.41.5. Settlement
S
5.41.2. AFP 5.41.6. Subsidy
5.41.3. PRO HOUSING 5.41.7. Eviction
5.41.4. Bonus 5.41.8. Others
5.42. Staff feeding
5.43. Freight on sales (debit balance)

ACCOUNTING THROUGH THE PERIODIC INVENTORY SYSTEM :

In the Periodic Inventory System there is no permanent control of entries, exits

and balances of merchandise stocks, through this system the value of the stocks
(merchandise) is determined, carrying out a physical count periodically, monthly,
bimonthly, quarterly, quarterly, semi-annually or at least once a year, it can be at
the beginning of the activity and this is called with the "Initial Merchandise
Inventory" account, or at the end of management which will be represented
with the "Final Merchandise Inventory" account, also It can be done at any
time depending on the case. According to Administrative Resolution number 05-
418-92 dated August 16, 1992 of the General Directorate of Internal Taxes, this
system is applicable to companies or businesses with gross income of Bs.
100,000.oo or capital less than Bs. 50,000.oo for these amounts, the use of

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 Kardex Inventories is not mandatory. When merchandise purchases are made, it
will be accounted for in the "Purchases" Account.

ACCOUNTING THROUGH THE PERPETUAL INVENTORY SYSTEM :

Under this system, stock records are always kept up to date. The advantage is
that the information it provides is current, but it requires the maintenance of
complete stock records.
It is said that there is a Complete Cost Method, when inventory control is
permanent or perpetual through the respective physical control cards and stock
valuation. Use this method, the following control accounts:
 Merchandise Inventory
 Cost of Goods Sold
FUNDAMENTAL EQUATION OF ACCOUNTING.

ASSETS = LIABILITIES + CAPITAL

From this fundamental equation we can solve the other two equations:

CAPITAL = ASSETS - LIABILITIES

LIABILITIES = ASSETS - CAPITAL

We know that Equity increases with Income and decreases with expenses, so we can
present our equation as follows:

ASSETS + EXPENSES = LIABILITIES + CAPITAL + INCOME

2.3. CLASSIFICATION OF ACCOUNTS :

The accounts are classified into: Nominal or Result Accounts, Real or Balance
Accounts and Order Accounts.

2.3.1. REAL OR BALANCE ACCOUNTS :

They are those that reflect information related to the financial situation of a
company as of a certain date. They are static reports. These accounts
represent the assets, liabilities and equity that a company has, as of a certain
date. They are called Balance Sheet Accounts because they go to the Balance
Sheet.

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2.3.1.1. ASSET ACCOUNTS :

The Asset represents all the Assets and Rights that are owned by the
business, grouped together. according to its greater or lesser degree of
"Availability or Liquidity".

2.3.1.2. LIABILITY ACCOUNTS :

They are the Debts and Obligations that the company has with Third
Parties whose maturity will be in the short, medium or long term.
The First Person is The Company, the Second Person is the Partners and
the Third Person is all the Creditors, natural or legal persons to whom the
company may owe something. Example of third parties: Cotas,
Saguapag, CRE, Banks, Financial Companies, Workers, etc.

2.3.1.3. EQUITY ACCOUNTS :

They are the Debts or Obligations that the company has with the
Partners, shareholders or owners of the company. It is the share of the
business that corresponds to the owner or partners of the company. It
constitutes the difference between Rights (assets) and Obligations
towards third parties (liabilities). In equation equation terms, Equity is:

2.3.2 NOMINAL OR INCOME ACCOUNTS :

These Accounts reflect the economic movement of the company in a certain

period of time. The result that a business produces can be LOSS or PROFIT,
which is determined through the INCOME and EXPENSES that occurred in a
given period of time.

2.3.2.1. EXPENSE ACCOUNTS :

These are the Expenses that the company incurs, carries out, consumes and
that are necessary for its operation and functioning, regardless of whether
these have been paid or not.

2.3.2.2. PE INCOME ACCOUNTS :

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 They are the Profits that a company obtains as a result of the sales of its sector
or other and complementary to its main sector, and through which profits are
generated, regardless of whether these have been collected or not.
Example: Common income that a company has

2.3.3 ORDER ACCOUNTS :

They are those whose purpose is to record the movement of securities that are
in a special situation. When the situation arises in which memorandum accounts
have to be used, debit memorandum accounts must be used, which go with the
assets, and credit memorandum accounts, which go with the liabilities.

2.4. PARTS OF AN ACCOUNT :

An account is made up of a left side called DEBT and a right side called
CREDITS. Where writing in the Debit means DEBIT or CHARGE and writing in
the Credit means CREDIT or CREDIT.

2.5. ACCOUNT BALANCES

The balance of an account is the surplus or residue of the difference between

Debit and Credit or Debits with Credits. It can be Debit Balance if the Debit is
greater than the Credit and Credit Balance if the Credit is Greater than the Debit.

2.5.1. ACCOUNTS WITH DEBT BALANCE:

2.5.2. ACCOUNTS WITH CREDIT BALANCE:

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2.6. WAY TO IDENTIFY THE ACCOUNTS OF AN ACCOUNTING ENTRANCE:

To identify the accounts involved depending on the type of transaction, it is

advisable to follow the following recommendations:

to. First determine what the exercise is about. If it is a purchase, sale,

payment, collection, etc.
b. Then, depending on the type of transaction, ask yourself the following
questions as appropriate, to determine what is recorded in the DEBT and
what is recorded in the CREDITS.

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NOTE:
If what is purchased is intended for sale in the PERIODIC ACCOUNTING SYSTEM,
it will be recorded under the name PURCHASES. If what is CQmpra is intended for
our use then register with the corresponding account name
NOTE:
If the transaction is a SALE, then something has to come out of the company. If what
is SOLD is MERCHANDISE, the SALES account is placed in the Periodic
accounting system. Otherwise, if what is being sold is not merchandise, then
register with the corresponding account name.

MOVEMENT OF ACCOUNTS

HAS TO TO HAVE

CHARGE OR DEBIT PAY OR CREDIT

A+G P+C+I

Debtor Creditor

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 THE PROCESS OF THE ACCOUNTING CYCLE

Transaction

Worksheet

Diary book
Statement of income Balance sheet

Ledger

Closing
Seats
BCSS

Settings

How does this process begin in a recently created entity?

1. CONTRIBUTION OF THE OWNER OR PARTNER

Whatever the nature of a legally formed company, it begins its activities with assets
and values contributed by the partners.

2.- INITIAL BALANCE

The Initial Balance Sheet is the Financial Statement that reflects the assets and
values initially invested in the company, by it or the owners valued in the legal
currency of the country.

It is the first financial statement that is presented in order to obtain the NIT, Municipal
Register and other records in different institutions, where it must necessarily be
affiliated to be considered as a going concern.

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3.- DAILY BOOK

It is a formal record of first entry, where business transactions are noted through
accounting entries. The initial entry to be recorded in this book corresponds to the
assets and liabilities of the Initial Balance Sheet.

Commercial Transactions.- Commercial Transactions are the exchange of values,

goods and/or Services for purchases, sales, exchanges, payments, collections, loans,
discounts, etc. What Merchants Do.

Accounting Entries.- The Accounting entry is the methodical and chronological record
of commercial transactions in the receipts and books, where the accounts involved are
recorded with specification of the reason and the respective values, for which they turn
out to be debtors and creditors. An Accounting Entry contains the following:

 Date
 Seat number
 Account Names
 Amounts of Charges (or Debit) and Credits (or Credits)
 Explanation or Gloss of the Transactions
 General Ledger Folio Reference

ACCOUNTING FACTS

The accounting equation leads to two “Accounting Facts”, which are:

1. Permutative Events.- A Permutative Event occurs when the type of Transactions

does not modify the Asset Amount at all. That is to say, the accounts involved in
an accounting entry do not generate Losses or Profits for the company. Which
means that no income or expense accounts are involved.

Example .- A business has Bs money. 15,000 and decides to buy a vehicle for
the same value. This does not generate an increase or decrease in our profits or
capital.

2. Modifying Facts.- When a transaction involves a modification in the Assets. That

is to say, the accounts involved in an accounting entry generate Income or
Expenses, which decrease or increase the Equity or Management Result.

Example.- A business has merchandise worth Bs. 30,000.- which have been sold
in Bs. 35,000.- which generates an increase in our profits and therefore in Equity,
in Bs. 5000, on the contrary it may be sold in Bs. 28,000.- which would generate a
loss or decrease in our Profits and therefore in the Equity in Bs. 2.000.-

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4.- LEDGER

It is the process of transferring, majorizing or pasting the debits and credits of the
accounts and subaccounts recorded in the journal and receipts, expenditure and
journal receipts to the main and subsidiary ledger.

The General Ledger is a cumulative record whose function is to classify the

information recorded in the Daily Book, in order to obtain the movement of debits
and credits and determine the account balance.

The format of a General Ledger account can be:

- in the form of an account
- on loose cards

5.- TRIAL BALANCE OF SUMS AND BALANCES.

It is the arithmetic verification of debits and credits both in the journal and in the main
ledgers. This check is carried out after having transferred the amounts from the Journal
and Ledger ledger. It arises when adding the accounts in both their movements and their
balances, serving as a quantitative and qualitative control of the accounting records.

6.- FINANCIAL STATEMENTS.

The next step is to formulate the financial statements based on the data
contained in the worksheet or the Trial Balance of Adjusted Sums and Balances
and are as follows:

 Balance Sheet or Financial Position.

The balance sheet is a financial statement that reveals the wealth of the
economic unit, that is, it shows its assets and rights (assets), obligations towards
third parties (liabilities) and towards the owners or partner (equity) on a certain
date. . It is fundamentally static, taking data at the end of an operations cycle.

 Statement of income

The Income Statement is an economic financial statement of a company's

operations for a specific period, reflecting the income, expenses and net profit or
loss for the period. It is a dynamic EEFF, because it represents the results
obtained in a certain period.

UNIT 2. –
ACCOUNTING RECORDS.
 Registration of accounting entries in the Journal.

21
 Accounting treatment of the legal provisions in force, Law 843, Law 2646 and
others.
 The bills. Classification. Transfers to the General Ledger.

AIM

Record commercial operations in the Journal, properly identifying the participation of the
accounts and taking into account GAAP, Accounting Standards and Legal Provisions in
force in Bolivia in aspects such as: taxes, contributions, accounting procedures, and
others contemplated in legislation.

SELF-PREPARATION

The student must correctly classify the accounts:

a) Balance Sheet Accounts

b) Income Statements
c) Order Accounts

You must also know the content of Law 843 and its Ordered Text, to understand VAT
and IT Taxes and their accounting record.

VAT on purchases
a) Origin of the tax.- Subjects of the Tax.- Exclusions.
b) VAT on purchases – Tax Credit.
c) Generation of tax credits for purchase invoices for Goods and Services, returns,
discounts on purchases.
d) Supporting document, VAT purchase book.

Sales VAT
a) Origin of the Tax Debt recorded in invoices for the sale of Goods and Services.
b) Generation of tax debits for returns, and discounts on sales.
c) Supporting documents, VAT sales book

Transaction Tax (IT)

Origin and Object of the tax, Taxable persons.- Exempt from the IT, Operations
excluded from the IT .

Financial Transaction Tax (ITF)

a) Origin and Purpose of the tax.
b) Form of accounting record.
.
Inventory Control System

22
Merchandise inventories constitute the most important assets in marketing companies,
therefore, their adequate valuation is decisive in establishing the results of operations for
the reporting period.

1. Perpetual Inventory System: Keeping permanent control of the inventory allows

recording the entry and disposal or exit of merchandise at cost, each time a
purchase is recorded and a sale is made. In this way, the balance of the
“Merchandise Inventory” account always reflects the quantity and amount of stock
on a given date and does not require regulations, as of the cut-off date for
operations.

UNIT ACTIVITIES

PRACTICAL 1

07/07/10 The “Comercial Santa Cruz” is opened, dedicated to the distribution of

mass consumption items, it has sufficient supporting documentation, which
you must record in accounting.

Assets :
The cash balance is Bs. 158,909, there is a current account at Banco Unión
with a balance of Bs. 181,287, among the current Bills of exchange there is
one accepted by Pedro Pérez de Bs. 42,404 the merchandise inventory
corresponds to 5,505 units of the product, at a unit cost of Bs. 33.30, A
delivery vehicle is valued at Bs. 95,500. There are furniture and shelves
valued at Bs. 57,780, and has its own premises for Bs. 159.038.

Passives :
Among its obligations is a commercial credit with Importadora Oriente de Bs.
71,740 and a Letter accepted for Bs. 65,579 in favor of Banco Unión with Vto.
In 45 days.

Transactions for the month of July:

09/07/10 Company incorporation expenses are paid to the lawyer, who gives us an
invoice for Bs. 61,667 in cash, which includes all expenses inherent to
mandatory registrations.

11/07/10 Purchase of merchandise, 2,034 units for Bs. 67,732.20, unit cost Bs. 33.30,
with Invoice to Importadora Resort, Bs is paid. 47,070 in cash and the balance
with a 30-day credit document.

12/07/10 A new purchase of merchandise, 2,603 units, from Importadora Pastrana for
Bs. 86,679.90, unit cost Bs. 33.30, according to Invoice, 43% is paid in cash,
37% by check, and the balance is financed within 30 days by credit document.

23
14/07/10 A sale of merchandise of 5,772 units, according to invoice, with a gross profit
margin of 59% over its cost, payment is made with Bs. 171,283.92 in cash,
Bs. 63,096 with a check from Banco de Unión and for the balance they sign a
45-day bill of exchange.

17/07/10 You pay for refreshments at the Salón de Te los Jazmines, Bs. 5,922,
according to the invoice. The cancellation is Bs. 3,440 in cash and the
balance is committed to pay in 30 days.

19/07/10 On this date, Mr. Pedro Pérez pays the debt in full, in cash Bs. 32,404 and the
balance with a check from Banco Unión.

On the same day, salaries are advanced to the staff for Bs. 22,200 in cash.

27/07/10 70% of the debt contracted with Importadora Oriente is paid in cash.

31/07/10 Staff salaries are paid for Bs. 59,729, taking into account the advance
payment dated 08/19, in cash.

It is requested :

1. Prepare Opening Balance

2. Record the entries in the Journal.
3. Transfer to General Ledger.
4. Add the Debits and Credits.
5. Determine Balances.
6. Prepare a Trial Balance of Sums and Balances

PRACTICAL #2

08/01/2010 The Company “Todo Ok” begins its activities with the following accounts: Cash
M/N Bs. 100,000.- Msc Bank M/N BS. 140,000.- Accounts Receivable Bs. 25,000.- Inventory
has 1800 units with a cost of Bs. 33.30, Document Payable to Suppliers Bs. 10,000.- and their
Bank Loan of Bs. 20,000.- Determine the Capital.

24
08/03/2010 We paid our Bank and Commercial Debts in cash, we amortized Bs to the bank.
5,000.- and We Pay our Suppliers Bs. 7.200.-

08/06/2010 We collected our account for Collection that we had Pending

08/08/2010 Money was withdrawn from Banco MSC for Bs. 6,000.-and it was left in the
company's cash register.

08/11/2010 We paid the Basic services of the Water and Light company for Bs. 2000.- The Tax
Base being Bs. 1.500.-

08/14/2010 We earn the first fortnight of the Salaries and wages that amount to Bs. 12.250.-

08/15/2010 We pay the First Fortnight of salaries and wages to the Workers.

08/16/2010 Merchandise is purchased for 100 Units and with a unit cost of Bs. 33.30.- we buy it
in Cash, with invoice.

08/18/2010 Merchandise is purchased for 500 Units with a unit cost of Bs. 33.30

08/20/2010 The worker Pedro Pérez requests a salary advance for Bs. 1,000.- for reasons of
illness.

08/22/2010 We bought a Keyboard for Bs. 200.- with invoice and in cash.

08/24/2010 We bought furniture and household goods from Bs. 890.- with invoice and in cash

08/25/2010 We sell merchandise 260 Units, according to invoice with a profit margin of 59% on
the cost of 33.30 Bs. They pay us in cash.

08/26/2010 750 units of merchandise are sold with a profitability margin of 59% over the cost of
Bs. 33.30.- They pay us with Bank with invoice.

08/27/2010 We sell merchandise 790 Units with a profitability margin of 59%, the Cost is Bs.
33.30.- They pay us 40% with Cash and the rest with a Check that is deposited into our account.
With invoice.

08/31/2010 Determine the Taxes to Pay corresponding to the month of August.

09/01/2010 Management determines to pay taxes.

PRACTICAL TASK #3

08/01/2010 Company “t” begins its activities with the following accounts: Cash M/N Bs.
150,000.- Msc Bank M/N BS. 190,000.- Accounts Receivable Bs. 25,000.- Inventory has 2000
units with a cost of Bs. 15.50, Document Payable Suppliers Bs. 5,000.- and their Bank Loan of
Bs. 80,000.- Determine the Capital.

25
 08/03/2010 We paid our Bank and Commercial Debts in cash, we amortized Bs to the bank.
10,000.- and We Pay our Suppliers Bs. 5.000.-

08/06/2010 We collected our account for Collection that we had Pending

08/08/2010 Money was withdrawn from Banco MSC for Bs. 8,000.-and it was left in the
company's cash register.

08/11/2010 We paid the Basic services of the Water and Light company for Bs. 3,000.- the Tax
Base being Bs. 2.500.-

08/14/2010 We earn the first fortnight of the Salaries and wages that amount to Bs. 25.000.-

08/15/2010 We pay the First Fortnight of salaries and wages to the Workers.

08/16/2010 Merchandise is purchased for 200 Units and with a unit cost of Bs. 15.50.- We
bought it in Cash, with invoice.

08/18/2010 Merchandise is purchased for 300 Units with a unit cost of Bs. 15.50

08/20/2010 The worker Marco Franco requests a salary advance for Bs. 2,000.- for reasons of
illness.

08/22/2010 We bought a CPU for Bs. 900.- with invoice and in cash.

08/24/2010 We bought Air Conditioning Bs. 1000.- with invoice and in cash

08/25/2010 We sell merchandise 300 Units, according to invoice with a profit margin of 30% on
the cost of 15.50 Bs. They pay us in cash.

08/26/2010 500 Units of merchandise are sold with a profitability margin of 30% over the cost of
Bs. 15.50.- They pay us with Bank with invoice.

08/27/2010 We sell merchandise 900 Units with a profitability margin of 30%, the Cost is Bs.
15.50.- They pay us 40% with Cash and the rest with a Check that is deposited into our account.
With invoice.

08/31/2010 Determine the Taxes to Pay corresponding to the month of August.

09/01/2010 Pay the Accrued Taxes

PRACTICAL EXAMPLE

The commercial company SAN JAVIER SRL ., began its activities on 07/03/07, with a cash
of Bs. 630,000, in Bank with Bs. 477,000, a batch of merchandise corresponds to 5,479

26
units of product, at a unit cost of Bs. 33, furniture and fixtures for Bs. 42,600, building for Bs.
234,000, has accounts payable for Bs. 75,000 and a mortgage payable for Bs. 160.000.

05/07/07 2,890 units of product are purchased, unit cost Bs. 33 worth Bs. 95,370 from the
company “Andina SA” 72% in cash and the balance to Credit, according to supplier invoice
No. 00090.

07/07/07 2,377 units are purchased at a unit cost of Bs. 33, with invoice for a value of Bs.
78,441, to credit under conditions 7/10; n/30.

12/07/07 3,930 units of merchandise are sold for cash with a gross profit margin of 68%
over their acquisition cost. Due to the sales volume, a direct discount of 7% is granted for
the total sales amount.

16/07/07 The merchandise purchased on 07/07/07 is cancelled, taking advantage of the

payment condition, with cash.

18/07/07 Merchandise 3,636 units from the sale dated 07/12/07 are returned.

26/07/07 1,730 units of merchandise are sold with a gross profit margin of 68% over their
acquisition cost, the client pays Bs. 41,210 in cash and the balance signs a 90-day bill of
exchange.

31/07/07 VAT and Cash Transaction Tax are cancelled.

What is its structure?:

27
3.- DAILY BOOK

It is a formal first-entry record, where business transactions are recorded through

accounting entries. The initial entry to be recorded in this book corresponds to the
assets and liabilities of the Initial Balance Sheet.

Commercial Transactions.- Commercial Transactions are the exchange of values,

goods and/or Services for purchases, sales, exchanges, payments, collections, loans,
discounts, etc. What Merchants Do.

Accounting Entries.- The Accounting entry is the methodical and chronological record
of commercial transactions in the receipts and books, where the accounts involved are
recorded with specification of the reason and the respective values, for which they turn
out to be debtors and creditors. An Accounting Entry contains the following:

28
  Date
 Seat number
 Account Names
 Amounts of Charges (or Debit) and Credits (or Credits)
 Explanation or Gloss of the Transactions
 General Ledger Folio Reference

ACCOUNTING FACTS

The accounting equation leads to two “Accounting Facts”, which are:

3. Permutative Events.- A Permutative Event occurs when the type of Transactions

does not modify the Asset Amount at all. That is to say, the accounts involved in
an accounting entry do not generate Losses or Profits for the company. Which
means that no income or expense accounts are involved.

Example .- A business has Bs money. 15,000 and decides to buy a vehicle for
the same value. This does not generate an increase or decrease in our profits or
capital.

4. Modifying Facts.- When a transaction involves a modification in the Assets. That

is to say, the accounts involved in an accounting entry generate Income or
Expenses, which decrease or increase the Equity or Management Result.

Example.- A business has merchandise worth Bs. 30,000.- which have been sold
in Bs. 35,000.- which generates an increase in our profits and therefore in Equity,
in Bs. 5000, on the contrary it may be sold in Bs. 28,000.- which would generate a
loss or decrease in our Profits and therefore in the Equity in Bs. 2.000.-

The format of the Daily Book is as follows:

29
4.- LEDGER

It is the process of transferring, majorizing or pasting the debits and credits of the
accounts and subaccounts recorded in the journal and receipts, expenditure and
journal receipts to the main and subsidiary ledger.

The General Ledger is a cumulative record whose function is to classify the

information recorded in the Daily Book, in order to obtain the movement of debits
and credits and determine the account balance.

The format of a General Ledger account can be:

30
 - in the form of an account
- on loose cards
We have an example of the second way

5.- TRIAL BALANCE OF SUMS AND BALANCES.

It is the arithmetic verification of debits and credits both in the journal and in the
main ledgers. This check is carried out after having transferred the amounts from
the Journal and Ledger ledger. It arises when adding the accounts in both their
movements and their balances, serving as a quantitative and qualitative control of
the accounting records.

31
6.- OPERATION SETTINGS

They are the adjustment entries that are made at the end of the period, in order to
obtain the real balance of the income and balance sheet accounts. Likewise, to
relate the income and expenses incurred in the period, it is necessary to analyze
and adjust the deferred income and expenses. , accumulated and necessary
adjustments according to Law. (Basic Accounting II)
7.- WORKSHEET FOR THE FORMULATION OF FINANCIAL STATEMENTS.

It is a tabular sheet that allows the company's accountant to correctly prepare the
financial statements classified as of a certain date so that it is not essential.
You can create a worksheet with six columns, ten columns, and twelve columns.

In Basic Accounting I prepare a worksheet that has the following sections:

- Balance for checking sums and balances.
- Statement of income.
- Balance sheet.

32
33
UNIT 3.-

FINANCIAL STATEMENTS

AIM

The objective of financial statements is to provide information about the financial

position, financial performance and cash flows of the entity that is useful to a wide
variety of users when making their economic decision. The financial statements
also show the results of the management carried out by the administrators with the
resources entrusted to them.

SELF-PREPRATION

The student must emphasize the following aspects.

Obtaining Financial Statements

a) Prepare a Worksheet without adjustments, transferring the account

balances to the established format.
b) Then you must identify whether the result is a profit or loss in
management and be able to transfer said value to the Balance Sheet in the
Equity Item, in order to demonstrate the increase or decrease in the
investment made by the partners.
c) The financial statements prepared in this Unit are:
 The Income Statement
 The Balance Sheet or Financial Position

8.- FINANCIAL STATEMENTS.

The next step is to formulate the financial statements based on the data
contained in the worksheet or the Trial Balance of Adjusted Sums and
Balances and are as follows:

 BALANCE SHEET OR FINANCIAL POSITION

 STATEMENT OF INCOME

34
Balance Sheet or Financial Position.
The balance sheet is a financial statement that reveals the wealth of the
economic unit, that is, it shows its assets and rights (assets), obligations
towards third parties (liabilities) and towards the owners or partner (equity)
on a certain date. . It is fundamentally static, taking data at the end of an
operations cycle.

35
Statement of income

The Income Statement is an economic financial statement of a company's

operations for a specific period, reflecting the income, expenses and net
profit or loss for the period. It is a dynamic EEFF, because it represents the
results obtained in a certain period.

LEARNING GUIDELINES

36
The development of the subject allows the student to acquire the techniques in the
registration of commercial operations with their active participation in all classes,
the development of the practices proposed in the MAP guide, research work and
other learning activities.
YOU. you must use:
 The exercises proposed in this guide, to acquire skills in recording
commercial operations following the Accounting Cycle Process
 The Bibliographies, to carry out research work and consultations so that you
can correctly apply the concepts and obtain greater solidity in the contents of
the subject.
 The established formats for recording in the Journal, General Ledger, BCSS
and Worksheet.

Santa Cruz, April 2010

37
 BIBLIOGRAPHY

JUAN FUNES ORELLANA ABC of Accounting

Cochabamba, Bolivia
Education and Culture Editorial, 2004

DANIEL AYAVIRI GARCÍA Basic Accounting and Commercial Documents

Oruro, Bolivia
Graphic Productions “N-DAG”, 1997

RUBEN CENTELLAS SPAIN Constant Currency Accounting

La Paz, Bolivia
A-Tiempo SRL, 1998

GONZALO J TERÁN G Basic Accounting Topics and Intermediate

Cochabamba, Bolivia
Education and Culture, 1998

GERMÁN ANTELO HURTADO Introduction to Accounting

Santa Cruz, Bolivia
University Publishing House, 1996

WALTER B MELLAS Accounting, the Basis for Management

Decisions
CHARLES B JONSON Mexico City, Mexico
Mc. Graw-Hill, 1986

GERARDO GUAJARDO CANTÚ Accounting

PHEBE M. WOLTZ Mexico City, Mexico
RICHARD T. ARIEN Mc. Graw Hill

ERIC L. KOHLER Dictionary for Accountants

Mexico City, Mexico
Hispanic-America

ABEL ESCARPULLI MONTOYA Accounting Notes I

Mexico City, Mexico
Mexican Institute of Accountants Public AC,
2001

ABEL ESCARPULLI MONTOYA Accounting Notes II

Mexico City, Mexico
Mexican Institute of Accountants Public AC,
2001

JHON VICTOR CARDONA G. Easy Accounting

EDILMA GIL M. Bogota Colombia
Printer Colombiana SA
RAFAEL BARANDIARAN
Dictionary of Financial Terms
Mexico City, Mexico
Trillas SA de CV

ANÍBAL IRARRÁZABAL Accounting Fundamentals and Uses

Santiago, Chile
Catholic University of Chile, 1 1997

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