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Basic Accounting Principle in Mexico v04

The document outlines basic accounting principles in Mexico, focusing on the VAT system, which operates on a cash-based approach despite being primarily accrual-based. It also discusses the use of foreign currency accounts and the importance of determining expense deductibility. Additionally, it provides examples of VAT journal entries and invoice components relevant to Mexican accounting practices.

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Murtaza Lanewala
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6 views6 pages

Basic Accounting Principle in Mexico v04

The document outlines basic accounting principles in Mexico, focusing on the VAT system, which operates on a cash-based approach despite being primarily accrual-based. It also discusses the use of foreign currency accounts and the importance of determining expense deductibility. Additionally, it provides examples of VAT journal entries and invoice components relevant to Mexican accounting practices.

Uploaded by

Murtaza Lanewala
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Basic Accounting Principle in Mexico.

1. VAT (IVA) System: Mexico utilizes a VAT system for sales and expenses. However, unlike the
VAT systems of many other countries, the Mexican VAT system is based on a cash-based
approach that should record twice. This means that a company must initially record accrual-
based VAT-related journals/accounts, which will later be replaced by cash-based VAT accounts.
See Appendix 1 for an example of a VAT journal entry.

2. Accounting Basis: Mexican accounting is primarily based on the accrual basis. However, due
to the emphasis on VAT in Mexico, many accountants maintain their books using a cash-based
system. As a result, some companies do not record accounts receivable (AR) or accounts payable
(AP) when they receive or issue invoices.

3. Foreign Currency Accounts: The Mexican accounting system uses USD (foreign currency)
accounts along with their corresponding evaluation accounts, generally referred to as
"complementary" accounts. An example of USD accounts is shown below:
Account Number
101-01-002 Customoer 1 USD 120
101-01-003 Customoer 1 USD Complimentary 2,160 <=120*19(FX)-120

4. Expense Deductibility: When recording journal entries, Mexican accountants typically


determine whether an expense is tax-deductible. If an expense is not tax-deductible, it is recorded
accordingly. Consequently, you may see accounts labeled as "non-deductible" within expense
accounts.
5. FX rate can be found below:
https://www.banxico.org.mx/tipcamb/main.do?page=tip&idioma=sp
You can use below FX
Terms:

IVA (Impuesto sobre el Valor Añadido): VAT


Factura=CFDI=Invoice
CP=Contador Publico =Public Accountant
Pedimento=Import document
ISR = Impuesto Sobre la Renta = Income Tax
IMSS = Mexican Social security payment
Appendix 1: VAT journals.

Date Type Number Concept Class Journal

Num. Refer. Ac c o u n Name Jour. Debits Credits


t

Sep 08, Journal 307 PENA RENTALS AND


2019 SERVICES COMPANY S DE
RL DE CV

1 501-07- Production indirect charges 13,000.00


000

PENA RENTALS AND


SERVICES COMPANY S DE
RL DE CV

2 201-01- PENA RENTALS AND 15,080.00


041 SERVICES COMPANY S DE
RL DE CV

PENA RENTALS AND


SERVICES COMPANY S DE
RL DE CV

3 119-01-000 Outstanding IVA 2,080.00

'4C49125E-9858-4404-A5F5-
83B2338540E6

Registger total : 15,080.00 15,080.00

Date Type Number Concept Class Journal

Num. Refer. Ac c o u n t Name Jour. Debits Credits

Sep 05, Outlays 430 ANTONIO HUERTA


2019 GARZA

1 603-82-000 Other Administrative 560.00


expenses

ANTONIO HUERTA
GARZA

2 102-01-002 BBVA peso 2400 560.00


ANTONIO HUERTA
GARZA

3 118-01-000 Paid creditable IVA 77.24

ANTONIO HUERTA
GARZA

4 119-01-000 Outstanding IVA 77.24

ANTONIO HUERTA
GARZA

Registger 637.24 637.24


total :
Appendix 2: Example of invoices

• Estado SAT: indicate whether the invoice is valid or not.


• Fecha Emision: Invoice date
• Folio: Invoice identification number provided by the company
• UUID: Invoice ID provided by the Mexican Tax Authority
• RFC Emisor: Tax ID of the issuer
• Nombre Emisor: Issuer name
• Nombre Receptor: Name of invoice recipient.
• SubTotal: Total amount for the service/product.
• Descuento: Discount
• Total IEPS: Total local energy consumption tax/This will be part of the service cost.
• IVA 16%: 16% of VAT
• Retenido IVA: Retention of VAT
• Retenido ISR: Retention of income tax
• Total: total amount to pay
• TotalOriginal: Total amount in original currency.
After reading above, please visit below for the Quiz

https://docs.google.com/forms/d/1FXGsYXbfDsD49Zq43zfjPNRlcH1pv8nBP-JDp8a2Itg/edit

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