ACCOUNTING PRINCIPLES

GENERALLY ACCEPTED
INTRODUCTION

The search for effective solutions and formulas that allow them to transcend
time has inspired man to create countless answers, some more lasting than others, but
ultimately, answers. Such has been the appearance of the accounting system, whose
origin has been precisely man's need to record the information resulting from
commercial transactions carried out with his peers.
The study of accounting has made it possible to standardize the financial
information that is produced in an entity, for which principles, standards, instruments
and tools are used to record, classify and summarize transactions that can be
quantified in monetary terms.
This work will deal with the topic of Generally Accepted Accounting
Principles, which refer to basic concepts or sets of propositions, guidelines to which
all subsequent development must be subordinated. Its mission is to establish
delimitations in economic entities, the bases for the quantification of operations and
the presentation of financial information.

The Generally Accepted Accounting Principles in Venezuela, which are also

mentioned in the Organic Tax Code, are a body of doctrines associated with
accounting that serve as an explanation for current or current activities and are issued
by the Federation of Associations of Public Accountants. of Venezuela, in its
publication DPC0, March 1, 1997.
 GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

The Generally Accepted Accounting Principles are a body of doctrines

associated with accounting, which serve as an explanation of current or current
activities and as a guide in the selection of conventions or procedures applied by
accounting professionals in the exercise of accounting. activities that are its own,
independently of the entities analyzed and that have been generally accepted and
approved by the Federation of Public Accountants of Venezuela, audited through its
permanent committee of accounting principles, in accordance with what is indicated
in paragraph 24 of the Statement of Accounting Principles No. 0 (DPC-0).
It is important to highlight that the application of accounting principles is also a
responsibility of the professionals who are related to the accounting records of the
company or entity.

The Accounting Principles are:

1) Postulates or Basic Principles , which constitute the foundation for the

formulation of general principles. These basic postulates and principles are: 1.
Equity, and 2. The Relevance.

1. Equity: It is linked to the final objective of the financial statements.

Information should be as fair as possible and the interests of all parties
taken into account in the appropriate balance. Therefore, financial
statements should be free of undue influence or bias and should not be
prepared to satisfy any particular person or group to the detriment of
another.
 2. Relevance: Requires that accounting information must refer to or be
usefully associated with the decisions it is intended to facilitate or the
results it wishes to produce.
Therefore, it is necessary to specify the specific type of information
required in the decision-making processes by the users of the financial
statements, based on the specific interests of said users and the economic
activity of the entity, commercial, industrial. , services, financial,
insurance, non-profit, etc.

2) General Principles , developed based on the postulates, which tend to ensure

that financial accounting information achieves the objective of being useful
for making economic decisions.

The General Principles comprise three categories:

1.- Assumptions derived from the economic environment :

1. Entity: It is an identifiable unit that carries out economic activities,

made up of combinations of human resources, natural resources and
capital, coordinated by an authority that makes decisions aimed at
achieving the purposes for which it was created. The entity may be a
natural person or a legal entity, or a part or combination of them. It
is not limited to the legal constitution of the units that compose it.

2. Emphasis on the economic aspect: Financial accounting

emphasizes the economic aspect of transactions and events, even
when the legal form may differ and suggest different treatment.
Consequently, transactions and events must be considered, recorded
and disclosed in accordance with their reality and financial meaning
and not merely in their legal form.

3. Quantification: Quantified data provides strong help in

communicating economic information and making rational
decisions.
 4. Unit of measurement: Money is the common denominator of
economic activity and the monetary unit constitutes an appropriate
basis for measurement and analysis. Consequently, without
disregarding other units of measurement, currency is the most
effective means to express, before the parties, the exchanges of
goods and services and the economic effects of events that affect the
unit.

2.- Principles that establish the basis for quantifying the operations of the
entity and the economic events that affect it:

1. Original Historical Value: The transactions and economic events

that accounting quantifies are recorded according to the amounts of
cash that are affected or its equivalent or the reasonable estimate
made of them at the time they are considered carried out in
accounting terms. These figures must be modified in the event of
subsequent events that cause them to lose their meaning, applying
the adjustment methods accepted by accounting principles that
systematically preserve the fairness and objectivity of the accounting
information. If the figures are adjusted for changes in the general
price level (NGP method) and are applied to all the concepts that
make up the financial statements, which may be modified, it will be
considered that there has been no violation of this principle; If the
figures are adjusted according to the method that combines changes
in the general price level with changes in the specific price level
(Mixed Method), the net results of the period must coincide with
those of the general price level method and Only in this case will it
be considered that there has been no violation of this principle, of
the original historical value. Regardless of the application of one or
another method, the situation must be duly clarified in the
information produced. The General Price Level methods and the
 Mixed Method are the methods provided for in the procedure for
presenting financial statements for the effects of inflation in the
Statement of Accounting Principles No. 10 (DPC-10).We should
not confuse the term Original Historical Value with Historical
Cost, since the term discussed is much broader, and allows us to
recognize the effect of inflation on it.

2. Economic Duality or Double Entry: For an adequate

understanding of the structure of the entity and its relationships with
other entities, the accounting presentation of: a ) The economic
resources available to achieve its purposes, and b ) The source of
these resources. This principle is known as Double Entry, and it
affects the accounting records by considering the debits and credits
in each of the accounting accounts involved in the transaction.

3. Going Concern or Continuing Business: The entity is normally

considered a going concern, that is, as an operation that will
continue for the foreseeable future. It is assumed that the entity has
no intention or need to liquidate or substantially reduce the scale of
its operations. If there are well-founded indications that reasonably
presume said intention or need, such situation must be revealed.

4. Accounting Realization: Accounting quantifies, preferably in

monetary terms, the operations that an entity carries out with other
participants in economic activity and certain economic events that
affect it.
Such operations and economic events must be recognized promptly
at the time they occur and recorded in the accounting. For this
purpose, the following are considered carried out for accounting
purposes:
a. The entity's transactions with other economic entities.
 b. Internal transformations that modify the structure of
resources or sources.
c. Economic events external to the entity or derived from its
operations, the effect of which can be reasonably quantified
in monetary terms.

5. Accounting Period: The need to make decisions in relation to an

entity considered ongoing or of continuous existence requires dividing
its life into conventional periods. Financial accounting presents
information about the economic activity of an economic entity in those
conventional periods. Operations and events as well as their derived
effects, which can be quantified, are identified with the period in
which they occur; Therefore, any accounting information must clearly
indicate the period to which it refers.
This accounting period is called the accounting year.

3.- General Principles that must gather information :

1. Objectivity: The items or elements incorporated in the financial

statements must have a cost or value that can be measured reliably.
In many cases the cost or value must be estimated; The use of
reasonable estimates is an essential part of the preparation and
presentation of financial statements and does not determine their
reliability. However, when an estimate cannot be made on a
reasonable basis, such item should not be recognized in the
accounting and therefore in the financial statements.
2. Relative Importance: Financial information only concerns that
which is, given its amount or nature, significant enough to affect
economic evaluations and decisions. An item has relative
importance when a change in it, in its presentation, valuation,
 description or any of its elements, could modify the decision of
some of its users of the financial statements.
3. Comparability: Economic decisions based on financial information
require, in most cases, the possibility of comparing the financial
situation and operating results of an entity in different periods of its
life and with other entities, therefore, it is necessary that the
accounting policies are applied consistently and uniformly. The need
for comparability should not become an impediment to the
introduction of better accounting policies, consequently when there
are more relevant and reliable options, the entity must change the
policy used and clearly indicate it in the information presented,
indicating, duly quantified, the effect that said change produces on
the financial information. The same applies to the grouping and
presentation of information.
4. Sufficient Disclosure: The accounting information presented in the
financial statements must contain in a clear and understandable
manner everything necessary to judge the results of operations and
the financial situation of the entity; For this reason, it is important
that the information provided contains sufficient elements of
judgment and basic material so that the decisions of the interested
parties are sufficiently founded.
5. Prudence: Uncertainties inevitably surround many economic
transactions and events, which requires them to be recognized
through the exercise of prudence in the preparation of financial
statements. When professional judgment is applied to decide in
those cases in which there are no bases to choose between proposed
alternatives, the one that reflects the least optimism should be
chosen; but observing at all times that the decision is equitable for
the users of the accounting information. However, the exercise of
prudence does not justify the creation of secret or hidden reserves or
 excess provisions, nor the deliberate undervaluation of assets or
income or overestimation of liabilities or expenses.

3) Principles Applicable to financial statements and specific items and

concepts ,
That is, the individual and concrete specification of the financial statements
and the specific items that comprise them.
The Federation of Colleges of Public Accountants of Venezuela has issued
over time, Declarations of Accounting Principles aimed at the application of
the Postulates or accounting principles generally accepted in the country.

Specific Rules

This is the second level of hierarchy in the basic structure of financial

accounting, it has its application at the level of the concepts and figures that are an
integral part of the financial statements.
These particular rules are divided into two:

Valuation rules

They refer to the way in which accountants must quantify specific concepts in
financial statements; that is, to the way in which monetary values are assigned to
such concepts. In this order of ideas we find that all the concepts that make up
the financial statements have valuation rules; Thus we find that there are rules to
value temporary investments, banks, cash on hand, advance payments,
stockholders' equity, inventories, etc.
Presentation rules

These indicate the way to structure the financial statements, according to

criteria established and accepted as valid at a general level with the intention of
giving them order.
 Prudential Criterion

As has been pointed out, the application of the standard in accounting does not
obey a single or inflexible model, nor do its rules, so for its correct use it is necessary
to have a criterion that allows the choice against various alternatives that arise.
Therefore, in the face of uncertainty, it is necessary to have professional judgment
based on prudence. The prudential criterion aims to incorporate a certain degree of
caution in the judgments necessary to make the required estimates under conditions
of uncertainty.

CONCLUSIONS

In conclusion, it is important to highlight, as Romero, J. (2003) that the

principles and laws that underpin accounting, when developed by man, to satisfy
individual and social needs; It allows and sets the tone to understand that they cannot
be recognized as finished truths, while they will continue to constantly evolve to
satisfy the needs that arise at each time that useful financial information is required
for decision making; It is the job of the accounting professional to adapt and apply the
principles in permanent reflection on practice.
Hence, the fundamental purpose of the Generally Accepted Accounting
Principles, established by the Federation of Colleges of Public Accountants of
Venezuela, is to standardize the criteria regarding the presentation and management
of financial information, in addition to the application of certain criteria established in
these mandatory standards, which guarantee the possibility that said information can
be understood by different users, be comparable between different periods, or with
information from other entities, among other aspects.

BIBLIOGRAPHIC REFERENCES

Brito, J. (1994). Basic accounting. Venezuela: Editorial Centro de Contadores

Catadora, F. (2000). Accounting. The basis for making managerial decisions.
Venezuela: Mc Graw Hill Interamericana.

Gertz Maner, Federico (1982) Origin and evolution of Accounting. Historical essay .
Mexico. Trillas Editorial.
Juana M. Morgado, 2010. Accounting I. Material –Socialize- Collective. PDF.
January, Mission Sucre.

Kieso, D. And Weygandt, J. (2003) Intermediate Accounting . Mexico. Limusa Wiley

Publishing.

Lopez Yusto, G. (1994) Accounting. Mexico: Mc Graw Hill Interamericana.

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Principles No. 2 (DPC-2) Auditing Standards Statement
“Accounting for Costs and No. 1 (DNA-1) “Statement on Technical Publication No. 13
Expenses of Companies or Auditing Standards and (PT-13) “Exchange Rate in
Activities in the Development Procedures.” Force at the Closing of the
Period.” Fiscal Year to Convert or
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Principles No. 6 (DPC-6) Declaration on Auditing
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The management" Permanent Loss in the Value of
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Year 2000 Problem.”

Statement of Accounting Standards Statement Special services

Principles audit Rendered By
Public Accountants
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