ACCOUNTING GUIDE
1ST PARTIAL
 Father of accounting: Luca Pacioli
 What does accounting does? It translates and summarize entities
transactions into useful information for decision making.
 Accounting equation: TOTAL ASSETS= LIABILITIES+EQUITY
 The accounting equation is based on the DUALITY basic
principle.
 LIABILITIES=ASSETS-EQUITY
 EQUITY:ASSETS-LIABILITIES
 What is an entity?
 Is an economic unit that through capital investment, combines
materials, human and technological resources, which are
coordinated by a decision-making authority with the purpose of
manufacturing and distributing goods and services to satisfy its own
objective.
Economic entity classification :
 Based on its legal form: individual/corporate
 Based on its resources source: private/public/mixed
 Based on its activities: manufacturing/trading/services
 Based on its economic purpose: profitable/ non profitable
 ASSETS (WHAT YOU OWN)
 Comprised of resources and rights owned by an economic entity,
from which future benefits are expected.
 They increase on the left side, decrease on the right side.
 Classified according to their convertibility:
 CURRENT ASSETS (SHORT TERM): Resources to be converted into cash
in less than one year.
 NON CURRENT ASSETS (LONG TERM): Resources to be converted into
cash within a period of more than one year.
 LIABILITIES
 Represent the debts and obligations of the economic entity. And
that will result in a decrease of economic benefits.
 Classified according to their settlement date in:
 SHORT TERM LIABILITIES: Debts/obligations whose demand or
maturity will be within a maximum period of one year.
 LONG TERM LIABILITIES: Debts/obligations whose due dates or
maturity will be more than one year.
 Sources increase on the right side and decrease on the left side.
 EQUITY
 Sources increase on the right side, decrease on the left side.
 Classification: by its origin
 CONTRIBUTED: Contributions from shareholders
 EARNED: Accumulated and periods profit or losses
 ECONOMIC DEFINITION: Residual value of assets after
deducting liabilities.
 LEGAL DEFINITION: Right of owners Right of owners over net
assets, exercisable by redemption or distribution.
 REVENUE/INCOME
 These are the amounts received by the entity as a result of its
operations. And which will cause an increase in its assets and/or
in its liabilities.
 Classification:
 BUSINESS INCOME
 FINANCIAL INCOME
 OTHER INCOME
 Sources increase on the right side, decrease on the left side.
 EXPENSES
 These are the amounts required to achieve the objective of an
entity’s activities. They represent a decrease in assets and/ or an
increase in liabilities.
 CLASSIFICATION
 Ordinary: EX-administrative expenses, sales expenses, financial
expenses)
 Non-ordinary: no typical.
 Sources increased on the olefrt5 side, decrease on the right.
 FINNANCIAL SOURCES
 INTERNAL SOURCE: EQUITY
 EXTERNAL SOURCE: LIABILITIES
 SELF SOURCE: REVENUE AND EXPENSES
BASIC FINANCIAL STATEMENTS
I.
II.
III.
BALANCE SHEET
INCOME STATEMENT
P&L
 FINANCIAL REPORTING STANDARDS/NORMAS DE
INFORMACIÓN FINANCIERA
 The CINIF settles these standards. (GAAP)

These are normative pronouncements that regulate
the preparation of the financial information contained in
the financial statements.
 The Mexican standards consist of:
 NIFS AND INIF
a. NIFS structure:
 CONCEPTUAL FRAMEWORK (this includes the basic
principles)
 NIFs (standards)
 INIF (INTERPRETATION TO NIFs)
 MEXICAN GAAP BULLETIN
 IFRS
 BASIC ACCOUNTING PRINCIPLES
 These are the fundamentals of the accounting system.
1. ECONOMIC SUBSTANCE: debe reconocerse el registro de cada
operación con documentos fuentes como contratos, convenios y
facturas, las transacciones deben ser analizadas profundamente,
capturando la escencia económica y jurídica.
2. ECONOMIC ENTITY: La empresa tiene que estar definida en sus
operaciones y objetivos con los que pudieran tener los socios del
negocio o empresa, quienes tendrán que estar separados y no
mezclados.
3. GOING-CONCERN: Asume como premisa que una empresa se encuentra
en operación continua y que se mantendrá en el futuro sin intención de
liquidar o reducir sustancialmente la escala de sus operaciones.
(ASSUMES CONTINUITY OF THE ENTITY)
4. ACCRUAL BASIS ACCOUNTING: Establece que los gastos deben de
registrarse cuando se conocen.
5. MATCHING PRINCIPLE: Establece que los ingresos deben asociarse con
los costos y gastos que ayudaron a generarlos. Gastos e inversiones
deben de ser reconocidos en el periodo en el que se genero el ingreso.
6. VALUATION: Establece que todas las operaciones de la empresa tienen
que ser cuantificadas en unidades monetarias (dinero) considerando las
características o atributos de los elementos a evaluar.
7. DUALITY: Se define como a donde va el dinero para que la empresa
funcione. Identifica la relación de los recursos de la entidad y su origen.
Resources=sources
8. CONSISTENCY: La existencia de operaciones similares en una entidad,
debe corresponder un mismo tratamiento contable (el cual debe
permanecer a través del tiempo, en tanto no cambie la esencia
económica de las operaciones.
 ACCOUNTING PROCESS
 The purpose of recording is to account for quantifiable economic
events in monetary units, in order to be able to track and
determine the results of operations. (Know the position of the
entity, how its operating and to keep control of transactions)
 THE RECORDING PROCESS:
1. CAPTURE: Source documents allow transactions to be
captured.
2. CLASSIFICATION:
 Balance sheet account: assets, liabilities and equity.
 Income statement accounts: Revenue and expenses.
3. RECORDING : individual record in terms of debit and credit.
 Journal and ledger entries
4. CALCULATION: accounts balance and Trial balance.
5. SYNTHESIS: financial statements.