Every transaction has its contra accounts/balancing entries.

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Value losses:

 Depreciation

Depreciation expense to accumulated depreciation.

You need to know:

o Useful life
o Residual
o Initial value
 Non-definite and non-systematic losses:

Impairment expense to accumulated impairment (deterioro).

This loss in value can be compensated eventually.

The accumulated impairment is placed in the asset column, just down the asset that
has been impaired (balance sheet).

When you recover the price = accumulated impairment to impairment revenue

 Definite losses:

Loss of asset/definitive loss to building (you don’t have building anymore).

Loss of asset to inventory

Loss of asset is a temporary account (expense).

Sales of non current assets:

You have a machine of 10.000€ with an accumulated depreciation of 1.000 (opening entries).

The annual depreciation rate is 10%.

We will sell the machine on June, 30, half in cash and have on account.

The price will be 5.000€.

The depreciation expense would be 500€ (10.000*5%), as well as the accumulated

depreciation.

Accumulated depreciation (1.500) (se cancela)+ cash (2.500) + account receivable (2.500) +
losses on disposal (8.500 (lo que vale ahora la máquina, tras la depreciación, es lo que se llama
the book value) – 5.000 (cantindad por la que se vende la máquina) = 3.500) to machinery
(10.000) (se cancela).

Tangible assets:

You use the name of depreciation  depreciation expense  accumulated depreciation

Intangible assets (patents, software…):

You use the name of amortization  amortization expense  accumulated depreciation.

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Accrual:

At the end of the accounting period. Utilities valued at 5.000€. You haven’t paid it yet. 
accrual principle  utilities expense to payables for the rendering of services

And for the energy company  accounts receivable to services rendered.

We rent a building for 1.000/month. We have paid 3 years in advance. We sign the agreement
on October, 1st.

El arrendador  Prepayment 36.000 to cash. Rent expense 3.000 to prepayment

El arrendatario  Bank (36.000) to unearned revenue (36.000)(liability). And unearned

revenue (3.000) (disminuyes la obligación) to rent revenue (3.000).

Income tax:

Operating result + financial result = income before tax.

We have to know the tax rate.

Income before tax – (income before tax * income tax rate) = net income.

In the journal  income tax expense (expense) to tax authorities income tax/tax payable
(liability, because we will have to pay it in July).

Current/non current:

If a liability is going to be paid in or less than 12 months of the balance sheet (31 st of
December), then it is current.
If we have a loan, and part of it will be paid within 12 months, then we need to discriminate
the amount that will be paid in the short-run (current loan to bank) and the amount that will
be paid in the long-run (non-current loan to bank).

As for the assets, you have to know when you are going to turn that right/good into cash.

Loan:

A loan of 24€. Pay 1€ for each month. Pay back the loan in 2 years.

January 1st  bank (24€) to current loan (12€) and non-current loan (12€).

February 1st  current loan (1€) to bank (1€). Non current loan (1€) to current loan (1€)
(because part of the non current is know a current loan  reclasificación).

March 1st  current loan (1€) to bank (1€). Non current loan (1€) to current loan (1€).

Poco a poco se va cancelando la cuenta de non-current loan. Y luego se cancelarará la current

loan.

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VAT:

Buyer  merchandise (100€) + input VAT (expense) (21€) to cash (121).

Seller  cash (363) to sales revenue (300) + output VAT (63)

Input VAT – output VAT = lo que le das a Hacienda.

Se hace cada trimestre.

March, 31

Jun, 30

Sept, 30

Dec, 31

Cierras los impuestos: output VAT en el debit e input VAT en el credit + VAT payable
(credit)/VAT recoverable (debit) (la diferencia. Depende de si es negativo o positivo.)

Input VAT : 10+12+15+17 (at March 31)

Output VAT: 20+43 (at March 31)

Closing entries: output VAT (63) to Input VAT (54) + VAT payable (9)

Se cierran las T-accounts y se añade una para la VAT payable.

El VAT se pagará en los próximos 20 días.

En el siguiente trimestre (June, 30):

Input VAT: 9+12

Output VAT: 2

Closing entry: Output VAT (2) + VAT recoverable (19) to input VAT (21)