BASIC ACCOUNTING PRINCIPLES

Monetary Unit Assumptions

-Financial consumptions are only reported. Singaporean dollars, US dollars and such. Regardless of
where you are, you are recording things that are financial in nature and can be measured in money.

Economic Entity Assumption

-activities of the entity be kept separate and distinct from the activities of its owner and all other
economic entities. An example Mr. Goodman is a businessman with a barber shop, water refilling station
and car wash business. The activities of these three businesses should be recorded separately from one
another.

Objectivity Principle

-Everything must be verifiable and associated with documents. You cannot just record anything without
any documents. Everything must be documented. An example is giving receipts to customers.

Going Concern Principle

-We assume that the business is operating indefinitely. We are assuming that the business wil be
operating indefinitely

Cost Principle (Historical)

-An example is the land was purchased today at P200,000 and for the rest of the year that the asset is
recorded.

Reporting Period

-Transactions are recorded and financial statements prepared for a period usually one year - January to
December (calendar period) or ending other than December 31 (fiscal period).

Accrual Principle

-Assets, liabilities, revenues and expenses should be recorded at the time period they relate or took
place regardless of when cash is collected or paid. When we pay salaries,, the amount we paid will be
the basis of our expenses.