You've probably heard about the General Accounting Plan more than once. It's a very important topic when studying a degree related to accounting or business. But do you really know what it is and what it encompasses?
Don't worry, we'll help you understand it perfectly and know what you're dealing with when you use this term. Shall we begin?
What is the General Accounting Plan
The General Accounting Plan, also called General Accounting Plan, or PGC, It is actually one of the most important documents for companies in Spain. It contains all the accounting regulations in force and applicable to companies.
In other words, it is about the legislation on corporate financial accounting.
The objective of this document is simple: to serve as a guide so that companies could have financial information in a uniform way (the same for all) and also transparent. In this way, what was sought was that, at a glance, it could be understood and compared with other companies.
And what is this General Accounting Plan? This is Royal Decree 1514/2007, of November 16, approving the General Accounting Plan. This Royal Decree is of a general nature. There is also Royal Decree 1515/2007, which is the specific plan for SMEs.
Is this the first General Accounting Plan in Spain?
The truth is no. If we had to remember, The first General Accounting Plan that was implemented in Spain dates back to 1973, date on which Decree 530/1973 was approved. This was characterised by having a voluntary principle of application. Only the Government could make it mandatory.
After that, in 1990, a new General Accounting Plan was approved, which regulated the accounting of companies. And the one that followed was the one we mentioned before, Royal Decree 1514/2007. One of the differences between the 1990 plan and the 1973 plan was its mandatory nature. This was already mandatory for all companies, as it had to comply with European Union regulations.
How the General Accounting Plan is structured
If you take a look at the Royal Decree that includes the General Accounting Plan, you will realize that It is divided into five parts:
Conceptual framework
The conceptual framework is actually one of the ones that most people overlook. And yet, it is the most important because it is where you are going to find the basics of accounting. What information can you get from it? For example:
- What are the requirements for annual accounts?
- What elements do the annual accounts have?
- How income, expenses, etc. should be recorded.
Registration and valuation rules
This section is also one of the most important. In it you will find 23 rules of registration and valuation that will allow you to carry out the accounting process. In other words, they are the ones that give you the keys to knowing how the company's economic and financial operations are carried out.
And what are those rules? You will have:
- The development of accounting principles.
- How you should treat tangible fixed assets.
- What are the rules on tangible fixed assets?
- How real estate investments are recorded.
- What is intangible fixed assets?
- What rules apply to intangible assets?
- What are non-current assets and disposal groups held for sale?
- How leases and other similar transactions are treated.
- What are financial instruments?
- How stocks work.
- How to deal with foreign currency.
- Everything you need to know about VAT, IGIC and other indirect taxes.
- What is profit tax and how is it registered?
- How to work with sales and service revenues.
- What provisions and contingencies exist and how to work with them.
- How long-term employee benefits liabilities are recorded.
- What to do with transactions involving payments based on equity instruments.
- How to register grants, donations and legacies received.
- How to work with joint ventures.
- Transactions between group companies.
- How to implement changes in accounting criteria and estimates, accounting errors and estimates.
- What to do after the financial year closes.
Annual accounts
In this section you have all the bases to be able to carry out the annual accounts and thus present the report or document in the Commercial Registry. In fact, this is mandatory for companies to do once a year and They are composed of the so-called "states". These are:
- Balance sheet or situation.
- Income statement or profit and loss account.
- Changes in Net Worth.
- Cash flows. This is the only one that is mandatory for large companies. For the rest it is voluntary.
- Annual report of the financial year.
However, in order for all companies to follow the same template, it is necessary that it be drawn up following the rules established in the Commercial Code, in the Law on Joint Stock Companies, in the Law on Limited Liability Companies and in the General Accounting Plan.
Chart of accounts
Unlike all the above, the chart of accounts is actually voluntary. But in practice, almost everyone uses it.
In this set of accounting accounts that are grouped into what are called groups and subgroups and are recorded in a specific order and distribution. Thus, the structure would be:
- Group. It is made up of nine different ones: basic financing, fixed or non-current assets, stocks, creditors and debtors for commercial operations, financial accounts, purchase and expense accounts, sales and income accounts, expenses charged to net worth, income charged to net worth.
- Subgroup. Which will be related to the previous groups. It has two digits.
- Account. Which has three digits and would go right after the subgroup.
- Subaccount. With four digits it would be even more specific to the account.
Accounting Definitions and Relationships
Finally, you would have the section on definitions and accounting relationships, which is a a kind of guide so that you know what goes on the debit side, what goes on the credit side, what is classified as an asset, liability, net worth, etc.
Now that you know a little more about the General Accounting Plan, would you be encouraged to take a look at the articles and learn how to implement it in your finances?