Republic of the Philippines

DEPARTMENT OF EDUCATION
Region IX, Zamboanga Peninsula
Salug III District
SALUG NATIONAL HIGH SCHOOL
Salug, Zamboanga del Norte

Name of Learner: ________________________________________ Grade Level: 11

Section: GENERAL ACADEMIC STRAND(GAS) Date:
ACCOUNTING CONCEPTS AND PRINCIPLES
LEARNING ACTIVITY SHEET
Quarter 3-Week 2
Background Information for Learners
Just as dancers have their concepts when it comes to dancing, and each of us has our own principles in
life, accounting has different concepts and principles that must be applied in every transaction.
In accounting, there are basis or assumptions every time we record a transaction. In order for the
accountants and everyone who is involved to have a concrete and united answer, they need to follow the
generally accepted rule for accounting.
Professionals sometimes argue when they record a transaction differently but it doesn't mean that one of
them is wrong. They may simply have different accounting concepts and principles.
The purpose of accounting concepts and principles is to justify every action or way of recording transactions of
the owners. There are different concepts and principles that may be applied and followed by the business. As
you go on, these accounting concepts and principles will unfold.
In doing financial reports and in recording business transactions, there are certain rules and principles that are to
be followed.
Here are the Accounting Concepts and Principles, (Ballada, 2017).
1. Materiality Principle
 This includes all assets that are immaterial to make a difference in the financial statements
which the company should record as an expense.
Example: Robi, an accounting clerk, purchased a friction pen. She estimated it to have a useful life up to three
months. Since a friction pen is immaterial relative to assets, it should be recorded as an expense.
2. Going-Concern Principle
 This means that the business is expected to continue indefinitely. Example: Mr. Clark’s sushi
business is experiencing difficulty, but he is still expecting it to continue that is why he still
updates his books of account.
3. Time Period Principle
 The financial statements are usually divided into specific time intervals. The business should
report the financial statements appropriate to a specific period.
Example: Teresita is an accountant of ABC Company. Her boss requires her to prepare financial statements
every month.
4. Monetary Unit Principle
 Any amount involved in the business is stated into a single monetary unit.
Example: A fast food chain has branches all over the world but their financial statements must be reported in
peso since they also have branch here in the Philippines.
5. Business Entity Principle
 In this principle, there is a separation and distinction of transactions between the business
enterprise and its owner or investor.
Example: Aling Babes, the owner of a mini grocery store, separates the assets and liability of her business from
her personal transactions. All transactions of the business will be just in the business while her personal matters
will be hers only.
6. Cost Principle
 This is an accounting principle wherein accounts should be recorded initially at cost as well as
assets at their respective cash amounts at the time the asset was purchased.
Example: When the owner of a sari-sari store buys a calculator, it should be recorded in the cash register at its
price when it was bought.
7. Accrual Accounting Principle
 In this principle, revenue should be recognized when earned regardless of collection. Same
goes with expenses which are recorded when incurred regardless of payment. But in the Cash
Basis Principle, revenue is logged when collected, and expenses should be recorded when paid.
A Cash Basis is not generally an accepted principle today.
Example: When a painter finishes performing his services, he should record it as revenue even if his
professional fee is still uncollected. When the painter has to pay his studio rent, he should record it as an
expense even if it is unpaid.
8. Matching Principle
 In this principle, cost should be matched with the revenue generated. It requires that the
expenses incurred during a period be recorded in the same period in which the related revenues
are earned. Example: Siony sold the goods to her customers, the revenue increases and the
inventories decrease. The reduction of the inventories in relation to revenues is called the cost
of goods sold and it should be recorded in the period in which the revenues were earned.
9. Disclosure Principle
 All necessary, relevant, and material information should be reported in this principle for
transparency.
Example: Aleena bought a computer for her computer shop. She made sure that it was recorded on the financial
reports.
10. Conservatism Principle
 This is also known as prudence. Assets and income should not be overstated while liabilities
and expenses should not be understated. In case of doubt, expenses should be recorded at a
higher amount. Revenue should be recorded at a lower amount.
Example: Suppose an asset owned by Mico, like inventory was bought for Php 20,000.00 but can now be
bought for Php 15,000.00. Then the company must immediately write down the value of the asset to at Php
15,000.00 because of the lower cost in the market. But if the inventory was bought for Php 20,000.00 and now
has a market value of Php 25,000.00, it must still be shown as Php 20,000.00 on the books because the gain is
only recorded when the inventory or asset is sold.
11. Objectivity Principle
 In this concept, financial statements of an organization must be presented with supporting solid
evidence and the intent behind this principle is to keep the management and the department of
accounting from making financial statements that are affected by their opinions and biases.
Example: Martimart Enterprise is trying to get a financing from Madas Bank for some expansion but the
enterprise’s bank wants to see a copy of its financial statements before it approves loan of the enterprise. The
enterprise’s bookkeeper prints out an income statement from its accounting system and mails it to the bank.
Most likely, Madas Bank will reject this financial statement because an independent party did not prepare it.

LEARNING COMPETENCIES WITH CODE

Explain the varied accounting concepts and principles (ABM_FABM11-111b-c-15)
Solve exercises on accounting principles as applied in various cases(ABM_FABM11-111b-c-16)
Illustrate the accounting equation(ABM_FABM11-111b-c-17)
Perform operations involving simple cases with the use of accounting equation(ABM_FABM11-111b-c-18)

ACTIVITY 1-IDENTIFICATION
Directions: Identify the principle describe in each item. Choose your answers from the box. Write your
answers on a separate sheet of paper.
Going Concern Accrual
Time Period Materiality
Monetary Unit Conservatism
Objectivity Disclosure
Cost Matching
 ___________1. Cost should be matched with the revenue generated.
___________2. All relevant and material information should be reported.
___________3. This is also known as prudence. In this principle, assets and income should not be
overstated while liabilities and expenses should not be understated in case of doubt.
___________4. In this principle, assets that are immaterial to make a difference in the financial
statements should be recorded as an expense.
___________5. This principle states that revenue should be recognized when earned regardless of
collection and expenses and should also be recognized when incurred regardless of payment.
___________6. Accounts should be recorded initially at cost.
___________7. Financial statements must be presented with supporting evidences.
___________8. Amounts are stated into a single monetary unit.
___________ 9. Financial statements are to be divided into specific time intervals.
___________10. Business is expected to continue indefinitely.
ACTIVITY 2-MULTIPLE CHOICE
Directions: Choose the letter that corresponds to the correct answer. Write the letter of your answers
on a separate sheet of paper.
1. The accounting guideline that requires financial statement information to be supported by
independent, unbiased evidence other than someone's belief or opinion is the _______.
A. objectivity principle B. monetary unit principle C. going-concern principle D. cost
principle
2. The principle that requires every business to be accounted separately and distinctly from its owner
or owners is known as the _______.
A. objectivity principle C. business entity principle
B. going-concern principle D. revenue recognition principle
3. The rule that requires financial statements to reflect the assumption that the business will continue
operating instead of being closed or sold, unless evidence shows that it cannot continue is the
_______.
A. going-concern principle B. business entity principle C. objectivity principle D. cost
principle
4. To include the personal assets and transactions of a business' owner in the records and reports of the
business would be in conflict with the _______.
A. objectivity principle C. realization principle
B. business entity principle D. going-concern principle
5. The objectivity principle means _______.
A. the information is supported by independent, unbiased evidence
B. the information can be based on what the preparer thinks is true
C. financial statements should contain information that is optimistic
D. a business may not reorganize revenue until cash is received
6. Marian Mosely is the owner of Mosely Accounting Services. The accounting principle that requires
Marian to keep her personal financial information separated from the financial information of Mosely
Accounting Services is _______.
A. monetary unit principle C. going-concern principle
B. cost principle D. business entity principle
7. The accounting principle that requires all goods and services purchased to be recorded at cost is the
_______. A. going-concern principle C. continuing-concern principle
B. cost principle D. business entity principle
8. The business files for bankruptcy when it is not in the _______.
A. going concern Principle C. matching principle
B. materiality principle D. monetary unit principle
9. The statement that is correct in relation to Cost Principle is _______.
A. cost is relevant. B. cost is reliable. C. only letter a is correct. D. letter a and b are correct.
10. Matching principle is important because proper matching of_____ and _____ gives a more
accurate report.
A. revenue and expenses B. cash and expenses C. cost and expenses D. value and expenses
11. The transactions of the business are separated from the personal transactions of the owner. This
principle is stated by _______________.
A. business entity B. matching principle C. objectivity D. going-
concern
12. The business will run in an indefinite time. This principle stated is from ____.
A. going-concern Principle B. conservatism C. accrual D. business entity
13. Conservatism is also known as _______. A. prudence B. patience C. frugality D. generosity
14. Mr. Pedro makes his financial reports monthly. What kind of principle his accountant performs
_______ Principle. A. time period B. conservatism C. revenue recognition D.
accrual
15. It requires the expenses incurred during a period to be recorded in the same period in which related
revenues are earned. This refers to _______.
A. matching principle B. objectivity principle C. conservatism principle D. materiality
principle

References for Learners:

Anastacio, Ma. Flordeliza. 2011. Financial Management (With Industry Based Perspective). Manila: Rex Book
Store.
Deped K To 12 Curriculum Guide, Fundamentals Of Accountancy, Business And Management 1. 2016.
Gilbertson, Claudia. 2010. Fundamentals Of Accounting. 8th ed. Australia: Cengage Learning.
Teaching Guide For Senior High School, Fundamentals Of Accountancy, Business And Management 1. 2016.
Quezon City: Commission on Higher Education.
Pefianco, Erlinda C. 1996. The Accounting Process: Principles And Problems. Makati: Goodwill Trading.
Padillo, Nicanor, Jr. 2011. Financial Statements Preparation, Analysis And Interpretation. Manila: GIC
Enterprises.
Young, Felina C. 2008. Principles Of Marketing. Manila: Rex Book Store.

Prepared by
LUCIEL A. TUYAC
Name of Writer

Checked by:

ELVIRA T. LONGCOP MA. DIOFEL L. LACAYA TRISHA AGAN ARNEL P. COLANGGO

TII/QA Member TII/QA Member TI/QA Member QA Chairman

Approved by: FERNANDO O. MALAZARTE

Principal IV

Note: Practice Personal Hygiene Protocols at all times. Please include this in All Learning Activity
Sheets.

Note: Practice Personal Hygiene Protocols at all times. Please include this in All Learning Activity
Sheets.

ANSWER KEY
ACTIVITY 1
1. Nature
2. Nature
3. process
4. process
5.nature
6.nature
7.process
8.nature
9. process
10. process

ACTIVITY 2
1.Identifying
2.Communicating
3.Accounting is a process
4.Accounting is an information system
5.French revolution
6.The present
7.Management
8.Owners
9.Creditors
10.Customers