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Cuentas de cuadre (plugs) y el principio de partida doble: construccion de estados financieros sin cuentas de cuadre y sin circularidad

Author

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  • Ignacio Velez-Pareja

Abstract

Typical textbooks on corporate finance and forecasting and budgeting recommend "closing" and matching the financial statements what is known as a plug. A plug is a formula to match the Balance Sheet using the differences in some items listed in it in such a way that the accounting equation holds. This is a very easy way to do it but it encompasses some risks. The risks are that certain numbers in the financial statements could be in error and still the plug would indicate that everything is correct because the Balance Sheet matches. In this work the reader finds a simplified financial model. In reality, financial models are huge and cumbersome. This is a very simplified model compared with what is found in practice. We present some basic principles for constructing consistent financial statements. The reader is encouraged to construct the financial statements for herself on a spreadsheet. The relevant financial statements are: the Balance Sheet (BS), the Income statement (IS) and the Cash Budget (CB). The construction of the financial statements starts from policies and/or targets (i.e. accounts receivable policy or target). With these targets or policies we can construct the financial statements.The contribution of this work is to show that we can construct financial statements without the use of plugs and circularity.

Suggested Citation

  • Ignacio Velez-Pareja, 2008. "Cuentas de cuadre (plugs) y el principio de partida doble: construccion de estados financieros sin cuentas de cuadre y sin circularidad," Proyecciones Financieras y Valoración 4957, Master Consultores.
    • Handle: RePEc:col:000463:004957
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    More about this item

    Keywords

    Accounting; forecasting financial statements; decision making; plugs; planning and control; double entry principle; unbalancing problem;
    All these keywords.

    JEL classification:

    • D6 - Microeconomics - - Welfare Economics
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate

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