10 accounting basics you need to master

By Anaraya Albornoz

Published: 30 April 2025

Discover the basic accounting concepts that every entrepreneur should know.

Accounting, a discipline that requires expertise in the field of financial management, can be supported by the use of accounting software, which guarantees rigour in the treatment of these matters.

An accounting firm or an independent accountant is also an option for the entrepreneur who wishes to outsource this procedure.

See all software Accounting

Basic accounting: what is it and what does the law say?

Definition

In a company, basic accounting is the science of organising financial data in chronological order by recording business transactions.

It is also the activity where financial flows are evaluated, in order to know the net worth of the company. Accounting allows the global visualisation of the economic situation in real time.

Legal provisions

According to article 25.1 of the Royal Decree of 22 August 1985 (Code of Commerce), every entrepreneur must:

To keep orderly accounts, appropriate to the activity of your company and allowing a chronological follow-up of all your operations.

10 Basic accounting concepts

1. General accounting

This consists of analysing transactions in order to report to the company's external stakeholders. It allows the estimation of taxes to be paid and is framed by law.

2. Analytical accounting

This is the company's internal tool that consists of drawing up annual accounts on which decision-making can be based.

It helps to drive the business forward with a clear vision by providing a comparison between predictions and actual figures.

3. General Chart of Accounts

The General Chart of Accounts defines the practices to be followed during the accounting cycle.

More precisely, the PCG defines all the rights and obligations applicable in Spain and formalises the rules of presentation of the accounts, in accordance with the laws drafted in the Commercial Code.

4. Accounting entries

These are the way in which we enter information into our accounts.

When economic transactions are generated, they must be recorded in the accounting books. This is done through a journal entry. These entries are made over time and are sorted by date in the journal.

5. Balance sheet

The balance sheet is a kind of snapshot of the company's financial situation. In itself, it is a balance sheet that looks at assets and liabilities.

6. Assets

These are everything that the company owns and that enables it to run its business year (machines, property, money in the bank, accounts receivable, stocks of raw materials or products).

They are classified in the balance sheet according to the speed with which the company can convert them into cash.

7. Liabilities

These are all financial obligations of the company (money the company owes to investors, partners or banks, taxes, etc.).

Balance sheet in equilibrium: liabilities = assets

8. Profit and loss statement

The profit and loss account provides an understanding of the enrichment (or impoverishment) of the company, due to its activity during a given period. This is measured through the notion of profit and loss:

Profit = Income - Expenses

9. Accounting principles

The Commercial Code defines the company's obligations in terms of accounting and establishes a single model from which to draw up the balance sheet and annual accounts.

It also distinguishes some essential accounting principles such as:

continuity of business
independence of financial years,
historical cost principle,
permanence of methods,
intangibility of the opening balance sheet.

10. Accounting documents

Accounting entries must respect legal compliance with the most common processes and documents used in accounting:

profit and loss ledger,
treasury,
general ledger,
bank reconciliation,
accounting entries,
payroll,
tax returns,
accounts payable,
financial reporting,
tax consolidation.