Accounting is keeping track of entries and creating a summary of financial transactions.
The concept of accounting is already extremely broad in itself. Imagine that of “general accounting”!
What does general accounting consist of?
General accounting is a tool used to know the assets as well as the performance of a company, by means of financial statements issued periodically.
The concept of “flow” is central to general accounting.
Indeed, general accounting aims to analyze economic, commercial (purchase/sale of a good), material (degree of use of equipment), or even legal (taxes, salaries) flows.
The interest of general accounting
As indicated above, general accounting is the first analytical tool for a business.
While management accounting aims to help leaders make decisions within the organization, general accounting is an exceptional source of information.
Banks, shareholders, customers, tax authorities, or even social organizations use it to find out which company they are dealing with.
General accounting is therefore an indicator of the financial health of the company and the sector since it is possible to compare different companies.
Business accounting is an analytical basis used by the public administration to adapt the taxation and the amount of VAT, and to INSEE and define the country’s GDP.
For this reason, bookkeeping is compulsory for all companies, and it must comply with specific rules.
Be an entrepreneur and keep your accounts
In France, the Commercial Code makes it compulsory to keep accounts as soon as a commercial, artisanal, industrial, or liberal activity is carried out.
In other words, all entrepreneurs must keep their accounts, with the exception of those who have opted for the status of micro-entrepreneur.
The type of business will define the degree of complexity and precision of the accounts to be kept.
Cash accounting (or “cash” or even “single-entry”), double-entry or even super-simplified accounting are all kinds.
The key documents of general accounting
Three standard reports are created by this accounting process:
1. the income statements. The profit and loss account summarizes the company’s income and expenses and makes it possible to capture the company’s performance. The calculation of the difference between income and expenses makes it possible to know whether the company observes profits or losses,
2. the balance sheets. Generated at the time of closing the current financial year, the balance sheet focuses more on the assets of the company, made up of assets and liabilities.
3. the annex. This is additional information allowing an in-depth reading of the income statement and the balance sheet. The degree of precision that the annex (basic, simplified, or abbreviated annex) must achieve depends directly on the form and tax regime of the company.
These documents are of capital importance since they are tools allowing the company to anticipate the future and to constantly adapt its strategy.
Debtor and general accounting
The entrepreneur wishing to manage his invoicing efficiently and to have a permanent overview of his company’s finances will be satisfied!
Indeed, Debtor is designed for micro-entrepreneurs wishing to get to the heart of the matter, without getting bogged down in the twists and turns of pure and hard accounting.
A company obtains video material worth 1000 £ from its supplier
It plans to resell this material 2000 £ to a customer.
For the material coming from Taiwan, the company must pay the shipping costs (50 €) and customs duties (60). The company must also pass the costs related to its activity on to this operation: rental of the warehouse, depreciation of the vehicle, driver’s salary, etc. (the repercussion amounts here to 200 £).
gross profit = 2000 – (1000 + 50 + 60) = 890 net profit = 890 – 200 = 690
Company (A) generates a net commercial profit of € 690 on this transaction.
Calculating in advance the commercial profit that you hope to generate during a sale, allows determining what is the minimum price at which your service/product must be sold to be at least in equilibrium.
Beyond this price, you will generate profits.