Accounting Concepts and Principles Lesson PDF

Accounting Concepts and Principles Generally Accepted Accounting Principles (GAAP) Refer to a common set of accounting principles, standards, and procedures issued by the Financial Accounting Standards Board (FASB). Generally Accepted Accounting Principles (GAAP) As applied in the Phil...

Accounting Concepts and Principles Generally Accepted Accounting Principles (GAAP) Refer to a common set of accounting principles, standards, and procedures issued by the Financial Accounting Standards Board (FASB). Generally Accepted Accounting Principles (GAAP) As applied in the Philippines Philippine Financial Reporting Standards (PFRS) Philippine Accounting Standards (PAS) Accounting Concepts Economic Entity or Accounting Entity The personal transactions of the owner are separate from that of the business he/she owns. Accrual Basis of Accounting Revenue is recorded when earned. Expenses are recorded when it happens Regardless of when cash is received or paid. Going Concern The company will continue operating indefinitely until the foreseeable future, and that company closure is not imminent. Monetary Unit Transaction s are express in a monetary unit of measure. Time Period Transactions are summarized and reported at regular time intervals. Calendar Year - January 1 - December 31 Fiscal Year – Any starting point + 12 months Accounting Principles  Cost Principle Amounts shown in financial reports are historical costs. Full Disclosure Principle Sufficient information for informed judgments. Matching Principle Matching revenues with expenses to know the profit of the business. Revenue Recognition Principle Recognize revenue when goods are sold or services are rendered, regardless of cash receipt. Materiality In accounting, materiality refers to the impact of an omissions or misstatement of information in a company’s financial statements on the user of those statements. If it is probable that users of financial statements would have altered their actions if the information had not been omitted or misstated, then the item is considered to be material. Materiality Conservatism If there are two acceptable alternatives in a situation, choose the alternatives that will result in lesser income or resource. Objectivity Recording and reporting should be performed with independence which is free from bias.