Accounting Principles of the Spanish General Accounting Plan

Abstract

**Accounting Principles of the Spanish General Accounting Plan** The Spanish General Accounting Plan (PGC) is based on a set of fundamental accounting principles that guide the preparation and presentation of financial statements. These principles include: 1. **Continuity**: Financial statements are prepared under the assumption that the entity will continue its operations in the foreseeable future. 2. **Accrual**: Revenues and expenses are recognized when they are earned or incurred, not necessarily when cash is received or paid. 3. **Consistency**: Accounting methods and practices should be applied consistently over time to ensure comparability. 4. **Prudence**: Caution should be exercised when making estimates and recognizing income and expenses, avoiding overstatement of assets or income. 5. **Materiality**: Financial statements should include all information that could influence the decisions of users, omitting trivial details. 6. **Separation of Periods**: Financial transactions should be recorded in the period they relate to, ensuring clear representation of financial performance. 7. **True and Fair View**: Financial statements should provide a true and fair view of the company's financial position and performance.  These principles ensure that financial reporting is transparent, reliable, and useful for stakeholders.

Learning outcomes

**The company's accounting will be developed by applying the following summarized accounting principles:** 1. **Prudence Principle**: Only realized profits as of the closing date of the financial year will be recorded. Conversely, foreseeable risks and potential losses originating in the current or previous years must be recognized as soon as they are known. This includes distinguishing between reversible or potential losses and realized or irreversible ones. All types of depreciation will also be taken into account, whether the year's result is positive or negative. 2. **Going Concern Principle**: It will be assumed that the company's management has an unlimited duration. Therefore, the application of accounting principles will not aim to determine the value of the assets for the purpose of total or partial disposal, nor the amount resulting in the case of liquidation. 3. **Acquisition Cost Principle**: As a general rule, all assets and rights will be recorded at their acquisition price or production cost. This principle must always be respected unless authorized adjustments are made by legal provision. 4. **Accrual Principle**: The recognition of revenues and expenses should be based on the actual flow of goods and services they represent, regardless of when the monetary or financial flow related to them occurs. 5. **Uniformity Principle**: Once a criterion is adopted in the application of accounting principles within the permitted alternatives, it must be maintained over time and across different contexts, as long as the assumptions that motivated the choice of that criterion remain unchanged. 6. **Recording Principle**: Economic events must be recorded when the rights or obligations they create arise. 7. **Matching Principle**: The result of the financial year will be determined by the revenues of that period minus the expenses incurred to generate those revenues, along with gains and losses not clearly related to the company's activities.

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