Accounting: 5 Basic Principles and Objectives

Contents:

• Accounting: what it is and its importance for business
• The main goals and objectives of accounting
• Accounting regulation in Belarus
• Key objects of accounting: what needs to be taken into account
• Basic principles of accounting
• Data source: primary accounting documents
• Accounting basics: double entry and accounting entries in practice
• Types of financial statements: what you need to know
• Efficient Accounting Organization in Your Company
• Key Aspects of Accounting

Accounting: what it is and its importance for business

Accounting is a continuous process of collecting and analyzing data about the financial condition of an enterprise. It includes the preparation of financial statements, which reflect all of the company's financial transactions.
The statements contain information on income and expenses, which helps evaluate the financial stability and performance of a business. Based on this data, companies can make strategic decisions.
Accounting data serves the interests of both internal and external users. Internal users, such as owners and managers, analyze this data to determine next steps in the company's development. For example, they can decide whether to expand the business or, conversely, scale it back if the company begins to make losses.
External users, including government agencies, creditors, and counterparties, also rely on accounting data to make decisions. For example, tax authorities can impose fines for accounting irregularities, and statistical agencies use the information to analyze the state of the industry.
Creditors and investors base their decisions about whether to cooperate with a company on its financial performance, which underscores the importance of high-quality accounting.

The Main Goals and Objectives of Accounting

Accounting plays a key role in the management of any organization, providing both internal and external stakeholders with up-to-date information about the company's financial condition and operations.
From this important goal follow several key tasks that must be performed to achieve transparency and efficiency in financial management. Let's consider them in more detail:

• Collection and systematization of accurate data on financial and economic activities, which allows for the formation of substantiated reports.
• Monitoring current results and forecasting future financial indicators, which contributes to more effective planning.
• Searching for and implementing reserves to increase the financial stability of the company and ensure its profitability.
• Control over compliance legislation and regulations in the course of doing business, which minimizes the risk of sanctions.
• Optimizing the use of material, labor and financial resources to improve overall efficiency.
• Managing accounts receivable and payable, which helps maintain liquidity and financial stability.
• Monitoring the availability and movement of company assets to ensure their safety and rational use.

Accounting regulation in

In Belarus, uniform accounting requirements are based on key documents that serve as the basis for all financial reporting.

• Law of the Republic of Belarus No. 57-Z of 12.07.2022
• National Accounting Standards (NAS 1-42)
• Instructions of the Ministry of Finance of the Republic of Belarus (No. 191, No. 113)

In addition to these basic acts, accounting in Belarus is regulated by a number of other documents that clarify and expand the standards.

• Industry standards — take into account the specific features of the application of NAS in various industries (for example, for agriculture — NAS 41)
• Internal accounting standards of organizations — are developed individually by companies and regulate their internal processes.
• Since 2024, mandatory electronic primary documentation has been introduced through the "Electronic Document" system.

All companies operating in Belarus are required to apply national and industry standards. :You can use your own standards if you wish.
It is important to note that for companies working with the EU, the use of International Financial Reporting Standards (IFRS) is available in parallel with NAS.

Key accounting objects: what needs to be taken into account

Accounting is a systematic process that covers the collection, documentation, and analysis of information about the financial condition of a business. The main elements that are taken into account in this process are called accounting objects. These include:

• Business transactions of the company. These are transactions or actions that directly affect the financial results and overall position of the company.
• Assets are property and property rights that can generate economic benefits. These include real estate, inventory, vehicles, cash in accounts and on hand, and customer accounts payable.
• Liabilities are a company's financial obligations, including loans, trade payables, and customer prepayments.
• Financing sources are funds used to run a business. This may be authorized capital, retained earnings, depreciation charges, and proceeds from the sale of assets.
• Revenue is cash receipts or material assets received as a result of the company's activities.
• Expenses are the costs incurred by the company in the course of its activities, including rent, taxes, salaries, and the purchase of goods or materials.

All of these items must be recorded in accounting entries. They are used to generate financial statements, which are an important element of financial control. In the next section, we will discuss what standards and rules must be followed in the accounting process.

Basic accounting principles

Accounting is a fundamental part of the financial management of any company. In accordance with the law, all registered organizations are required to maintain records in accordance with established principles.

• Continuity - accounting is maintained from the moment of registration of a legal entity/sole proprietor without interruptions. In case of temporary suspension of accounting, it is necessary to restore reporting for the missed periods, which may require additional costs and time.
• Double entry — Each business transaction is recorded simultaneously by debit and credit, which ensures balance and reliability of reporting. This means that the sum of debit entries must always equal the sum of credit entries.
• Monetary measurement — is another important principle that requires that all accounting data be expressed in monetary form. In Belarus, accounting is conducted only in BYN (exception: foreign currency sub-accounts).
• Documentation — All entries must be supported by primary documents, which guarantees the transparency and legality of accounting transactions.
• Frequency — Each company is required to prepare reports for the month, quarter, half-year and year, which makes financial information available for analysis and decision-making decisions.

Data source: primary accounting documents

Each transaction carried out in accounting must be confirmed by relevant documents, known as primary documents.
A primary document is an official document that records the facts of an enterprise's economic activity. In accordance with the law, it is prohibited to make entries in the accounting accounts without supporting documents.
Such documents include:

• Acceptance certificate for goods or services;
• Acceptance certificate for work performed or an act of commissioning of a facility;
• A waybill confirming the transfer of goods between companies;
• A bank statement confirming successful completion of payment;
• check or cash receipt order.

Accounting entries are generated based on primary documents - entries reflecting changes in the accounting accounts. We will discuss accounting entries in more detail in the next section.

Accounting Basics: Double Entry and Accounting Entries in Practice

Every financial transaction in a company must be carefully documented and reflected in the accounting accounts. This is the basis for proper accounting.
Accounting accounts are special instruments on which all business transactions of an organization are recorded. They serve to group accounting objects and convert them into monetary format.
Graphically, an accounting account can be represented as a two-sided table. The left side is debit (Dt), and the right side is credit (Ct). Each side of the account is responsible for different aspects of financial flows.
Sources of funds are recorded in credit, while recipients of these funds are recorded in debit. Thus, all entries in the accounts, known as accounting entries, are made using the double-entry method.
Let's consider a practical example. Suppose a company purchased a product and sold it some time later. What will the accounting entries look like in this case?

When purchasing a product, the company records the first entry: the product was received at the warehouse at a price of 300 rubles. At the same time, an obligation to pay for it arises.
The debit entry reflects the receipt of inventory at the warehouse for 300 rubles, and the accounts payable is equal to the same amount - this is the company's obligation to pay for the product.
Now let's look at the process of selling a product. When selling a product, the company creates two entries: the first records the revenue from the sale, and the second confirms that there is no more inventory of this product.
Revenue is reflected in the credit of the account, increasing by 400 rubles. This also creates an account receivable—the right to demand payment from the customer. This creates a double entry system: debit → accounts receivable, credit → revenue of 400 rubles.
Furthermore, the company must record an inventory write-off: now there are no more goods in the warehouse. This reduces the inventory amount, which is recorded as a credit to the inventory account. This amount also goes into cost, reflecting the company's expenses for purchasing the goods. Thus, the entry looks like this: debit → cost price, credit → inventory for 300 rubles.

Types of financial statements: what you need to know

There are 6 main forms of financial statements, each of which plays an important role in the financial accounting of a company.

• The balance sheet is a document that reflects the state of assets, liabilities and equity of a company on a specific date.
• Profit and Loss Statement — shows the company's income and expenses for a certain period, as well as the final financial result. This report is generated on a cumulative basis since the beginning of the year, which allows you to see the dynamics of changes for the quarter, half-year and year.
• Statement of Changes in Equity - demonstrates how the company's equity has changed during the reporting period, including all financial indicators.
• Statement of Cash Flows - tracks all receipts and payments of cash for various types of company activities during the reporting period.
• Appendix to the Balance Sheet - contains explanations of the items of the balance sheet and profit and loss statement.
• Explanatory Note - discloses additional information necessary to understand the financial condition of the organization.

All reporting forms are interconnected. Each is completed based on accounting data, making them an integral part of the company's financial analysis.

Efficient accounting organization in your company

After registering a business, one of the first steps for a manager is setting up accounting. This is not only a mandatory requirement, but also an important aspect that will help manage finances and comply with legislation.
How to choose a specialist for accounting? In small organizations, this task can be taken on by the manager themselves or an appointed accountant. In larger companies, specialized accounting departments are often created. In addition, outsourcing of accounting services is growing in popularity, which allows you to attract professionals without the need to maintain a full-time accountant.
There are various forms of accounting, which can be divided into two main types: regular and simplified.

• Simplified. This form is suitable for small businesses, non-profit organizations and individual entrepreneurs.It is characterized by a smaller volume of accounting work.
• Regular. It is used in medium and large companies where strict compliance with all accounting rules and national standards is required.

What documents are required for accounting? Responsibility for their preparation lies with the manager or appointed accountant. The main documents include:

• The company's accounting policy is the key document that describes the accounting methods. It should be individually developed for each company and used consistently.
• Electronic primary documents, which are the basis for accounting.
• Chart of accounts according to NAS— a list of accounts that will be used in accounting, with corresponding instructions.

How to keep accounting records in practice? The choice of software depends on the size of the company and the volume of transactions performed. For small businesses, office programs such as spreadsheets are suitable. Larger organizations often use specialized solutions, such as 1C: Accounting for Belarus, BIT Finance, and the Electronic Document web platform.

Key Aspects of Accounting

• Accounting is the process of collecting, analyzing, and systematizing a company's financial data, which allows for the generation of reliable reporting.
• Accounting is mandatory for all businesses. This can be carried out either by an internal accountant or by external specialists through outsourcing.
• Each financial transaction must be supported by primary documents and recorded in the accounting accounts using the double-entry method.
• The main forms of financial statements include: the balance sheet, the profit and loss statement, the statement of changes in equity, the statement of cash flows, and explanatory notes to the statements.
• Financial statements can be prepared in accordance with NAS. Accounting methods are described in detail in the company's accounting policy.