10 accounting basics you need to master

By Anaraya Albornoz

Published: April 30, 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 rigor 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 provide?

Definition

In a company, basic accounting is the science that seeks to organize financial data in chronological order, thanks to the recording of business operations.

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

Legal provisions

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

To keep an orderly accounting system, appropriate to the activity of your company that allows a chronological follow-up of all your operations.

10 Basic accounting concepts

1. General accounting

This consists of analyzing transactions to serve as a report to the company's external stakeholders. It allows estimating the taxes to be paid and is framed by law.

2. Analytical accounting

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

It helps to drive the business with a clear vision, thanks to the fact that it provides 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 formalizes the rules of presentation of the accounts, in accordance with the laws written in the Commercial Code.

4. Accounting entries

These are the form in which we enter the information in our accounting.

When economic transactions are generated, they must be recorded in the accounting books. This action is done through a journal entry. These entries are made over time and are arranged 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 allow the development of its business year (machinery, property, money in the bank, accounts receivable, stock 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 the financial obligations of the company (money owed by the company to investors, partners or banks, taxes, etc.).

Balance sheet in equilibrium: liabilities = assets

8. Profit and loss statement

The profit and loss statement allows to understand 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 = Revenues - Expenses

9. Accounting principles

The Commercial Code defines the obligations of the company in terms of accounting and establishes the same model from which to prepare the balance sheet and annual accounts.

It also distinguishes some essential accounting principles such as:

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

10. Accounting documents

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

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