Keep your company's accounting records and comply with your obligations.

All companies must keep accounting records of the transactions affecting their assets and activities.

Each record, or accounting entry, is necessary to chart the flow of activity, but also to produce a true picture of the company's financial situation.

Whether it is part of your day-to-day life or you are taking your first steps into the world of accounting, this article will help you find some of the answers you are looking for: what is an accounting record and what is its function, how are they classified? How are they classified, what data should they reflect, etc.? It's time to clear up those doubts!

See all software Accounting

Accounting register: definition

An accounting record (also known as an accounting entry or journal entry) consists of recording every incoming or outgoing movement involving the financial statements and/or the assets and liabilities of a company.

The set of accounting records is then used as the basis for calculating the profit or loss for the year and the balance sheet.

Furthermore, the accounting records are not only used to monitor the financial status of the company, but also to support the relevant authorities in the event of an audit to show that the company complies with the law.

💡 There is no legal obligation as to who has to make the accounting entries. Although it is not necessary to be a professional accountant or to have any kind of accreditation, it is useful to have some knowledge of accounting.

Types of accounting records

1. Accounting and record-keeping obligations

Article 25 of the Commercial Code stipulates that the following accounting records are mandatory:

• Journal: In which all financial transactions are recorded in chronological order with their respective vouchers.
• Inventory book and balance sheets - among which the following stand out:

• • The balance sheet of the company's initial situation.
  • The trial balance.
  • Closing inventory for the financial year.
  • Annual accounts: comprising the balance sheet, profit and loss account and annual report.

Similarly, there are a series of records that are not required by law, but which allow the company to keep better track and manage transactions according to the activities it carries out, for example:

• The income statement,
• the cash flow statement.

2. PGC classification

The General Chart of Accounts provides for two classifications for the types of entries according to the different transactions to be recorded:

1. Journal entries by subject matter:

• Purchases: acquisition and payment of products and services.
• Sales: sale and collection of products and services (customer advances, cash discounts, returns, etc.).
• Payrolls: operations related to the Human Resources Department (payment of payrolls, accounting of self-employed workers' fees and settlement of social security payments).
• Financial operations: contracting and maintenance of financial operations (foreign currency operations, contracting of financing operations, payment of financing operation instalments).
• Taxes and levies: settlement of taxes and levies (VAT, accounting of corporate taxes).
• Depreciation and provisions: allocation and application of depreciation and provisions for fixed assets and current assets.
• Fixed assets: acquisition and maintenance of fixed assets (entries for expenditure, subsidies, additions and improvements to fixed assets).
• Subsidies: entries that do not correspond to the other groups are recorded here, such as swaps and the recording of invoices issued and received with subsidies.

2. Entries by account:

• Group 1: Basic financing - Accounts related to long-term financing (members' contributions, share capital, retained earnings, reserves, etc.).
• Group 2: Fixed assets - Structural assets (emphasis on possible depreciation over time).
• Group 3: Inventories - Raw materials and other components of the company's production process.
• Group 4: Creditors and debtors - Obligations and claims of the enterprise arising from its business activity or social obligations.
• Group 5: Financial accounts - Accounts related to the enterprise's cash flow (financial claims and liabilities).
• Group 6: Purchases and charges - Accounts arising from impairment of fixed assets, provisions and foreseeable expenses.
• Group 7: Sales and income - Income from trading activities, extraordinary income and financial profit.

Data in an accounting record

In order to correctly classify and identify each of the transactions, it is necessary that the accounting entries have the following information:

• Date of the entry.
• Transaction number: to record each transaction chronologically.
• Accounts involved: code and corresponding denomination in accordance with the aforementioned PGC classification.
• Amounts associated with each account.
• Description of the transaction.

Benefits of keeping accounting records

Beyond the obligatory nature of some of the records, there are a number of advantages for the company as a result of keeping all accounting records correctly, for example:

• Verify profitability,
• serve as a backup to third parties,
• control cash flow,
• help in decision making in order to promote the growth of the company.

See all software Accounting

Automating accounting records

All this information may seem difficult to handle manually if you have a large turnover and, as we have seen, there is a degree of complexity in classifying each of the transactions.

So why not use accounting software to make this tedious task easier?

By automating your processes:

• You save time (and therefore money),
• reduce errors,
• you facilitate the work of verification and control.

In short, accounting records are of great benefit to your company's bookkeeping, as they give you a clear and comprehensive picture of the state of your finances because numbers don't lie! So make the most of them and grow your business.