Accounting Principles Overview

• Accounting's main function is informational.
• Taxpayers with a flat-rate tax on recorded income must maintain a record of income.
• Valuing each asset, liability, income, and expense separately is the principle of individual valuation.
• Accounting functions include planning.
• The accrual principle states that revenues and related costs are recorded regardless of payment timing.
• Matching costs to the relevant month is based on the matching principle.
• The continuity principle requires consistent valuation methods for assets and liabilities over successive years.
• Accounting standardization aims to harmonize accounting laws internationally.
• Accounting covers financial statement analysis and asset/liability valuation for financial results.
• The prudence principle mandates updating asset values regardless of financial results.
• The going concern principle assumes the entity will continue operations in the foreseeable future without significant change.
• Subjective accounting involves observing events from the unit's financial and organizational perspective.
• The accrual principle dictates recording all economic operations for a given year, regardless of payment status.
• Simplifications in accounting principles are allowed if they don't significantly impact the accuracy and clarity of financial reporting.
• Unregulated areas in accounting law should follow international accounting standards first.
• The National Accounting Standards Committee develops and issues national accounting standards.
• Accounting includes gathering and storing accounting evidence and analyzing a unit's economic situation.
• Assessing an entity's ability to continue operating involves evaluating all available information about its foreseeable future, covering at least one year from the balance sheet date.
• Investing capital in a hotel's picture counts as long-term investments in property balance sheets.
• The correct balance sheet equation relationship is: foreign capital = assets - equity.
• Cash in hand is presented as part of short-term investments in the balance sheet.
• Construction in progress is shown as part of tangible fixed assets in the balance sheet.
• The beginning balance of the prior year is the basis for preparing an opening balance in line with the consistency principle.
• It is also the opening balance sheet of the following year.
• Employee wage liabilities are part of current liabilities in the balance sheet.
• A balance sheet is required once a year, on the last day of the business year.
• External accounting errors shall be revised by crossing out error and signing.
• The identifying number of bookkeeping proof is the number used to record and store this evidence.
• Analytical accounts arise from the horizontal split of accounts.
• Verifying accounting evidence must be documented on the evidence itself.
• A formal accounting check finds all the required features in the accounting document.
• Net assets are equivalent in value to equity.
• Decreeing/assigning accounts means indicating how it is booked.
• Obtaining a bank loan with a simultaneous transfer of funds to a bank account doesn’t affect the balance sum.
• The goal of accounting control is to ensure that the operation is factual, reliable, purposeful, and legal.
• To calculate the monthly depreciation of a building with an initial value of 42,000 zł and an annual depreciation rate of 2.2%, the calculation is as follows: (42,000 zł * 0.022) / 12 = 77 zł.
• Obligations is due when the entity buys goods on merchandise/trade credit

Ledger accounts

• Asset accounts can have an opening debit balance and an ending debit balance.
• The "charge to" entry refers to posting an economic operation on the debit side in accounting.
• Two ending balances can occur on asset-liability accounts.
• The double-entry principle applies to synthetic accounts.
• A simple accounting entry is made on one synthetic account and one analytical account.
• Analytical accounts result from a horizontal division of accounts.
• On the "Financial Result" account, profit appears as a credit balance.
• A debit balance on the "Settlement of Goods Purchases" account indicates unbilled deliveries.
• Debts in foreign currency are valued on the balance sheet date using the average rate announced by the National Bank of Poland (NBP).
• Liabilities in foreign currency are also valued on the balance sheet date using the average rate announced by the NBP.
• Credit balance on "Settlement of Material Purchases" account means the arrival of non-invoiced supplies.
• Acquisition cost is equal to purchase price + additional costs associated with this purchase.
• Goods' valuation per unit using weighted average method shows goods prices are up-to-date over the year.
• True statement based on accounting equation is that profit leads to financial assets equity increase.
• Retained earnings are an item of the equity statement.

Capital stock

• A source of reserve capital creation in a joint-stock company is the excess obtained from the sale of shares above their nominal value.
• Equity in a limited liability company consists of share capital and reserve capital.
• In a limited liability company, if liabilities are 25,000 zł and total assets are 100,000 zł, the equity coverage ratio is 75%.
• An enterprise is required to prepare financial statements on December 31st.

Intangible asset

• Costs of completed development work are included under intangible assets.
• Perpetual usufruct rights should be classified as long-term investments with fixed assets in the balance sheet.
• Book value (shareholders equity) formula: assets - short-term liabilities - bonds payable - charter capital = book value.
• Advanced transfer payments shall be credited to "other current employee benefits"

Ledgers

• Material receipt is recorded on the Debit side of Material account and Credit of purchase settlement
• Interchangeable Materials are reported at purchasing price
• FIFO inventory valuation is at the discretion of the unit
• Inventory is the establishment of the actual facts and state of assets
• Economic benefits are generated from business assets
• Car purchased for purpose of resale is considered finished product

Investment

• a bill of exchange, under 3 Months = short-term investment
• assets include inventory via specification

Accounting

• Contains balance sheet
• Financial statement can only be approved after finance statement created
• Not a typo or data entry error, as long as statement correct with accurate supporting doc