ACCOUNTING LAW
The Accounting Law definition is the system used to record, summarize, analyze, and categorize the financial transactions of an individual or a business. This is used in legal cases to determine the amount of damages owed to a plaintiff. This is sometimes called accounting for profits.
Accounting is the practice of accurately and timely recording, analyzing, summarizing, and classifying financial transactions of a business. Commonly, those financial transactions are recorded in a set of financial records called financial statements.
Accountants or Certified Public Accountants usually handle the accounting procedures of a business or person. In most cases, accounting procedures use generally accepted accounting principles (GAAP) to prepare financial statements. In some countries, accounting procedures may use International Financial Reporting Standards (IFRS).
Financial accounting is a branch of accounting that provides people outside the business—such as investors or loan officers—with qualitative information regarding an enterprise’s economic resources, obligations, financial performance, and cash flow. Management accounting, on the other hand, refers to accounting data used by business owners, supervisors, and other employees of a business to gauge the enterprise’s health and operating trends.
Types of Accounting Law
- Financial Accounting Law: It’s the most common type of accounting. It refers to the process of generating interim and annual financial statements.
- Managerial Accounting Law: Although this category uses the same information as financial accounting, such information is used to make business decisions, such as budgeting and forecasting.
- Cost Accounting Law: It’s mainly focused on analyzing the costs related to the production of a product by a business to establish its selling price.
What is it for the Accounting Law?
A business’s accounting system contains information relevant to a wide range of people. In addition to business owners, who rely on accounting data to gauge the financial progress of their enterprise, accounting data can communicate relevant information to investors, creditors, managers, and others who interact with the business in question. As a result, accounting is sometimes divided into two distinct subsets—financial accounting and management accounting—that reflect the different information needs of the end users.
Financial accounting focuses on recording historical financial information in an effort to provide a financial statement. Financial accounting is governed by accounting principles, which are rules that dictate how accounting data should be recorded and reported.
The Financial accounting data can be used to calculate a company’s total revenue, total expenses, and net income for a given period of time. This information is vital for the development of all levels of financial statement analysis, from individual investors to large banks and accounting firms.
Management accounting, on the other hand, focuses on providing information that is used internally by managers to make decisions about how to allocate resources and run the business. Management accounting is governed by management accounting principles, which are rules that dictate how management accounting data should be recorded.
Generally Accepted Accounting Principles
GAAP is the guidelines, rules, and procedures used in recording and reporting accounting information in audited financial statements. In order to have a vibrant and active economic marketplace, participants in the market must have confidence in the system.
Various organizations have influenced the development of modern-day accounting principles. Among these are the American Institute of Certified Public Accountants (AICPA), the Financial Accounting Standards Board (FASB), and the Securities and Exchange Commission (SEC). The first two are private sector organizations; the SEC is a federal government agency.
Accounting Principles in Mexico
The purpose of accounting law is to ensure that businesses and individuals accurately report financial information, so that investors can make informed decisions. Financial statements must comply with accounting principles, which are defined by accounting standards setters.
These organizations develop accounting standards in an effort to create financial statements that present a “true and fair view” of a company’s financial. While the General Law for Commercial Enterprises of 1934 provides broad rules on the form of the financial information to be provided to shareholders.
Article 5 of the Mexican Constitution grants legal authority to the local professional accountancy organizations and their federal umbrella, the Instituto Mexicano de Contadores Públicos (IMCP), to set applicable accounting and auditing standards for their members. The IMCP has delegated the accounting standard-setting process to the Mexican Board for Research and Development of Financial Reporting Standards (CINIF).
The CINIF was established on August 21, 2001, as an independent, nonprofit entity that conducts research and related activities for the purpose of developing and issuing Mexican financial reporting and accounting standards that are consistent with international standards. Contact with LawInCabo for more information.