Starting a business involves taking on many responsibilities, and one of the most important is accounting. Accounting is more than a legal requirement; it is a strategic tool for maintaining financial control. Below, we explain the key accounting concepts that every start-up company in Spain should know.
1. Importance of Accounting for Start-ups
Accounting provides a detailed record of economic transactions and is essential for informed decision making and tax compliance. Spanish regulations require accounting to be carried out in a way that ensures a true and fair view of the financial situation, reflecting the economic reality without distortions.
Benefits of proper bookkeeping:
- Financial control: Allows to analyse expenses and income, improving the management of resources.
- Strategic planning: Helps to anticipate cash flows and optimise investments.
- Regulatory compliance: Avoids penalties by complying with current legislation.
2. Fundamental Accounting Principles
Accounting in Spain is governed by principles that guarantee the consistency and comparability of financial statements:
a. Going Concern Principle
This principle assumes that the company will continue to operate in the near future, which influences asset valuation and financial planning. If there are indications of liquidation, the financial statements should be adjusted to reflect this scenario.
b. Accrual basis
Income and expenses are recognised when they are incurred, regardless of when payment or collection is made. This ensures that the financial statements correctly represent the performance of the enterprise in each period.
c. Principle of Prudence
Indicates that revenues should only be recorded when they are certain, while expenses and losses are recorded as soon as they are expected. This avoids overstating profits and reflects potential risks in advance.
d. Principle of Consistency
Once an accounting method has been adopted, it should be maintained on a consistent basis, unless there are significant changes. This allows comparability over time and should be documented in the Annual Report if any adjustments are made.
e. No Offsetting Principle
Offsetting assets against liabilities or income against expenses is prohibited unless specifically permitted by law. In this way, each item is presented separately, ensuring transparency of information.
f. Principle of materiality
It allows for the omission of certain details that do not have a material impact on the faithful representation of the financial statements. Minor items can be grouped together to simplify the presentation without losing accuracy.
3. Mandatory accounting records
Companies must keep certain accounting records up to date:
- Journal: Documents all transactions in chronological order.
- Inventory and Annual Accounts Book: Reflects the financial situation of the company, including the balance sheet and profit and loss account.
- Minute Book: Records important decisions taken by the shareholders’ meeting, which is essential in companies.
4. Balance Sheet and Income Statement
- Balance Sheet: Provides a snapshot of the company’s financial situation, detailing assets, liabilities and equity.
- Income Statement: Presents the income and expenses for the period, showing profitability and operating efficiency.
5. Tips for New Entrepreneurs
- Use accounting software: Tools such as A3, or Sage simplify the recording process and automate the preparation of reports.
- Keep a regular check: Carry out internal reviews to ensure the accuracy of the records.
- Engage accounting advice: Helps ensure compliance and optimise accounting management.
How Gutiérrez Pujadas & Partners Can Help
At Gutiérrez Pujadas & Partners, we provide expert advice to help entrepreneurs comply with their accounting obligations and optimise their financial processes. Our team of specialists ensures that your company is in line with regulations and benefits from efficient accounting management. Contact us for personalised advice and ensure the success of your business.