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Accounting Concepts and Principles

Juan dela Cruz opened a pet shop business called Petness First Petshop and deposited PHP500,000 into its bank account. The business earned PHP50,000 in revenue but Juan was unsure if some expenses totaling PHP60,000 should be included. These expenses included salaries of PHP20,000, rent of PHP10,000, utilities for the home and store totaling PHP25,000, insurance of PHP5,000 and withdrawals of PHP10,000. Accounting principles provide guidelines for classifying transactions and preparing financial statements, addressing issues like separating business from personal finances and recognizing revenues and expenses in the proper periods.

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Jessa Joy Alano Lopez
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173 views18 pages

Accounting Concepts and Principles

Juan dela Cruz opened a pet shop business called Petness First Petshop and deposited PHP500,000 into its bank account. The business earned PHP50,000 in revenue but Juan was unsure if some expenses totaling PHP60,000 should be included. These expenses included salaries of PHP20,000, rent of PHP10,000, utilities for the home and store totaling PHP25,000, insurance of PHP5,000 and withdrawals of PHP10,000. Accounting principles provide guidelines for classifying transactions and preparing financial statements, addressing issues like separating business from personal finances and recognizing revenues and expenses in the proper periods.

Uploaded by

Jessa Joy Alano Lopez
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Accounting Concepts

and Principles
!
Petness First Petshop
• Juan dela Cruz opened his pet shop business
called Petness First Petshop. He opened a bank
account for his business and deposited
PHP500,000. The business earned PHP50,000
but he had doubts with the recorded expense of
PHP60,000. He is not sure if he should include
the following items as expenses:
Salaries Expense 20,000
Rent Expense 10,000
Utilities Expense(at home) 15,000
Utilities Expense(at store) 10,000
Insurance Expense 5,000
Withdrawals 10,000
total 60,000
1. Business entity principle – a
business enterprise is separate and
distinct from its owner or investor.
2.Going concern principle – business
is expected to continue indefinitely
3.Time period principle – financial
statements are to be divided into
specific time intervals.
4.Monetary unit principle –
amounts are stated into a single
monetary unit
5.Objectivity principle – financial
statements must be presented with
supporting evidence

6.Cost principle – accounts should


be recorded initially at cost
7.Accrual Accounting Principle – revenue should
be recognized when earned regardless of collection
and expenses should be recognized when incurred
regardless of payment. On the other hand, the cash
basis principle in which revenue is recorded when
collected and expenses should be recorded when
paid. Cash basis is not the generally accepted
principle today.
8.Matching principle – cost should
be matched with the revenue
generated
9.Disclosure principle – all relevant
and material information should be
reported
10.Conservatism principle – also known as prudence. In
case of doubt, assets and income should not be overstated
while liabilities and expenses should not be understated.

11.Materiality principle – in case of assets


that are immaterial to make a difference in
the financial statements, the company
should instead record it as an expense.
12. Substance over form- Information presented in the financial statements
of a company should truthfully and faithfully represent the financial
condition and financial performance of the company. An accountant should
look at the substance of every financial transaction rather than its legal form.
13.Use of judgment and estimate- Accounting
estimates are approximations made by
accountants or the management in the
preparation of financial statements. The use of
reasonable estimates is an essential part of the
preparation of financial statements and does not
undermine their reliability .
15. International Financial Reporting
Standards (IFRS)-are pronouncements issued
by the International Accounting Standards
Board (IASB) that intend to enhance the
comparability of the financial statements of
all companies around the world.
14. Generally Accepted Accounting
Principles(GAAP)-consist principles,
standards, rules, and guidelines that
companies follow to achieve consistency and
comparability in their financial statements.
15. International Financial Reporting Standards (IFRS)-
are pronouncements issued by the International
Accounting Standards Board (IASB) that intend to
enhance the comparability of the financial statements
of all companies around the world.
16. Philippine Financial Reporting Standard (PFRS)- issues
standards to be used in the Philippines in the form of Philippine
Financial Reporting Standadrs (PFRS)
The PFRS include all of the following
1. Philippine Financial Reporting Standards (PFRS) which
corresponds to International Financial Reporting Standards (IFRS)
2. Philippine Accounting Standards (PAS)
which corresponds to International
Accounting Standards ( IAS)
14. Philippine Financial Reporting Standard (PFRS)- issues
standards to be used in the Philippines in the form of Philippine
Financial Reporting Standars (PFRS)
The PFRS include all of the following
1. Philippine Financial Reporting Standards (PFRS) which
corresponds to International Financial Reporting Standards (IFRS)
2

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