Los ajustes contables - El Ciclo Contable #Contabilidad

Introduction to Accounting Adjustments

Purpose of Accounting

• The primary goal of accounting is to provide relevant, reliable, and comparable information for decision-making.

• Financial statements must meet these three characteristics before being presented to users.

Types of Records in Accounting

• Records are classified as adjustments and reclassifications, which are essential for achieving the objectives of financial reporting.

• Adjustments involve recognizing economic events that lead to changes in results and can occur monthly, quarterly, semi-annually, or annually based on reporting frequency.

Examples of Adjustments

Common Adjustment Types

• Six common examples of adjustments include:

• Accrued revenues

• Payable expenses

• Deferred revenues or expenses (also known as advances)

• Depreciation and amortization

• Provisions

• Differentials

Accrued Revenues Example

• A publicity company bills another company Q10,000 monthly but receives payment in the first five days of the following month. This transaction needs proper accounting records despite the delayed payment.

• In December, the publicity company recognizes an asset (accounts receivable) for Q10,000 while also recording ordinary income for the same amount.

Payable Expenses Example

Recording Payable Expenses

• Using the previous example: when a service is billed in December but paid in January, it should still be recorded as an expense in December by the paying entity.

• The entry would show advertising expense and accounts payable both at Q10,000 since accounts payable represents a liability.

Deferred Revenues/Expenses Example

Insurance Policy Payment Scenario

• On December 1st, a company pays Q12,000 for a one-year insurance policy covering from December 1st to November 30th of the following year. This payment is recorded as prepaid insurance (an asset).

Monthly Adjustment Process

• By December 31st (one month later), an adjustment must be made to recognize one month's worth of insurance expense (Q1,000), reducing prepaid insurance accordingly from Q12,000 to Q11,000.

Insurance Company Perspective

Recording from Insurance Company's Viewpoint

• The insurance company initially records this transaction as cash received with a corresponding liability for unearned revenue (insurance collected in advance).

Monthly Revenue Recognition Adjustment

• As each month passes and coverage is provided, they adjust their records by decreasing liabilities and increasing recognized revenue accordingly until all months are accounted for by November next year.

Conclusion on Depreciation

Understanding Depreciation

Understanding Depreciation and Provisions in Accounting

The Concept of Depreciation

• Depreciation reflects the reduction in value of assets over time, crucial for presenting an asset's real value on financial statements.

• When a new vehicle is purchased, its value decreases immediately upon leaving the dealership; it will never be sold for the original price paid.

• To record depreciation, an expense and a liability are registered to adjust the asset's value. For example, a vehicle may depreciate by 30,000 quetzales.

• Accumulated depreciation reduces the historical cost of an asset over time; thus, a vehicle valued at 70,000 quetzales could drop to 40,000 after two years of depreciation.

Understanding Provisions

• Provisions are set aside to prepare for future obligations that are certain in existence but uncertain in amount or timing.

• An example includes estimating uncollectible accounts receivable; if total receivables are 100,000 quetzales, one might provision 3% (3,000 quetzales).

• Unlike accumulated depreciation which compounds yearly, provisions must be adjusted based on current accounts receivable totals.

Currency Differentials in Accounting

• Companies often hold foreign currency accounts; all figures should be recorded in the entity's functional currency.

• If a bank account holds $100 with an exchange rate of 7.78 quetzales per dollar but shows 8.90 quetzales on record, an adjustment is necessary due to currency differentials.

• Adjustments involve reducing the asset account and recording a loss under "currency differential" if there’s excess reported compared to what should exist.

Conclusion