Concept

Lesson 02.1: Accounting Concepts

& Principles
 FUNDAMENTALS OF Lesson Objective
ACCOUNTANCY, BUSINESS &
MANAGEMENT 1
Grade 11-ABM
Accounting Concepts & Principles
100% of the students are expected to achieve at least
➢ Lesson Objective 75% proficiency
➢ Lesson Introduction
➢ Video Clip
➢ Lesson Discussion At the end of this module, you are expected to:
➢ Recap a. explain the varied accounting concepts and principles and
➢ Check up Test
b. solve exercises on accounting principles as applied in
various cases.
 (FUNDAMENTALS OF Introduction
ACCOUNTANCY, BUSINESS &
MANAGEMENT 1
Grade 11-ABM Just as dancers have their concepts when it comes to dancing,
Accounting Concepts & Principles and each of us has our own principles in life, accounting has
different concepts and principles that must be applied in every
➢ Lesson Objective transaction.
➢ Lesson Introduction
➢ Video Clip In accounting, there are basis or assumptions every time we
➢ Lesson Discussion record a transaction. In order for the accountants and everyone
➢ Recap who is involved to have a concrete and united answer, they need
➢ Check up Test 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
 FUNDAMENTALS OF Video Clip
ACCOUNTANCY, BUSINESS &
MANAGEMENT 1
Grade 11-ABM
Accounting Concepts & Principles

➢ Lesson Objective
➢ Lesson Introduction
➢ Video Clip
➢ Lesson Discussion
➢ Recap
➢ Check up Test

https://youtu.be/fPOcUtfGtxQ
 FUNDAMENTALS OF Video Clip
ACCOUNTANCY, BUSINESS &
MANAGEMENT 1
Grade 11-ABM
Accounting Concepts & Principles

➢ Lesson Objective
➢ Lesson Introduction
➢ Video Clip
➢ Lesson Discussion
➢ Recap
➢ Check up Test

https://www.youtube.com/watch?v=U-D0O-oyQPI
 FUNDAMENTALS OF Video Clip
ACCOUNTANCY, BUSINESS &
MANAGEMENT 1
Grade 11-ABM
Accounting Concepts & Principles

➢ Lesson Objective
➢ Lesson Introduction
➢ Video Clip
➢ Lesson Discussion
➢ Recap
➢ Check up Test

https://www.youtube.com/watch?v=atLGf6fqZYI
 FUNDAMENTALS OF Discussion
ACCOUNTANCY, BUSINESS &
MANAGEMENT 1
Grade 11-ABM Let us now discuss and elaborate on what the accounting
Accounting Concepts & Principles
concepts and principles are.
➢ Lesson Objective
➢ Lesson Introduction
In doing financial reports and in recording business transactions,
➢ Video Clip there are certain rules and principles that are to be followed.
➢ Lesson Discussion
➢ Recap Here are the Accounting Concepts and Principles, (Ballada,
➢ Check up Test 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.
 FUNDAMENTALS OF Discussion
ACCOUNTANCY, BUSINESS &
MANAGEMENT 1
Grade 11-ABM 2. Going-Concern Principle
Accounting Concepts & Principles
This means that the business is expected to continue indefinitely.
➢ Lesson Objective
➢ Lesson Introduction
Example: Mr. Clark’s sushi business is experiencing difficulty, but
➢ Video Clip he is still expecting it to continue that is why he still updates his
➢ Lesson Discussion
books of account.
➢ Recap
➢ Check up Test 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.
 FUNDAMENTALS OF Discussion
ACCOUNTANCY, BUSINESS &
MANAGEMENT 1
Grade 11-ABM 4. Monetary Unit Principle
Accounting Concepts & Principles
Any amount involved in the business is stated into a single
➢ Lesson Objective
➢ Lesson Introduction
monetary unit. Example: A fast food chain has branches all over
➢ Video Clip the world but their financial statements must be reported in
➢ Lesson Discussion
peso since they also have branch here in the Philippines.
➢ Recap
➢ Check up Test 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.
 FUNDAMENTALS OF Discussion
ACCOUNTANCY, BUSINESS &
MANAGEMENT 1
Grade 11-ABM 6. Cost Principle
Accounting Concepts & Principles
This is an accounting principle wherein accounts should be
➢ Lesson Objective
➢ Lesson Introduction
recorded initially at cost as well as assets at their respective cash
➢ Video Clip amounts at the time the asset was purchased. Example: When
➢ Lesson Discussion
the owner of a sari-sari store buys a calculator, it should be
➢ Recap
➢ Check up Test 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.
 FUNDAMENTALS OF Discussion
ACCOUNTANCY, BUSINESS &
MANAGEMENT 1
Grade 11-ABM Example: When a painter finishes performing his services, he
Accounting Concepts & Principles
should record it as revenue even if his professional fee is still
➢ Lesson Objective uncollected. When the painter has to pay his studio rent, he
➢ Lesson Introduction
➢ Video Clip should record it as an expense even if it is unpaid.
➢ Lesson Discussion
8. Matching Principle
➢ Recap
➢ Check up Test 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
 FUNDAMENTALS OF Discussion
ACCOUNTANCY, BUSINESS &
MANAGEMENT 1
Grade 11-ABM 9. Disclosure Principle
Accounting Concepts & Principles
All necessary, relevant, and material information should be
➢ Lesson Objective
➢ Lesson Introduction
reported in this principle for transparency. Example: Aleena
➢ Video Clip bought a computer for her computer shop. She made sure that it
➢ Lesson Discussion
was recorded on the financial reports.
➢ Recap
➢ Check up Test 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.
 FUNDAMENTALS OF Discussion
ACCOUNTANCY, BUSINESS &
MANAGEMENT 1
Grade 11-ABM Example: Suppose an asset owned by Mico, like inventory was
Accounting Concepts & Principles
bought for Php 20,000.00 but can now be bought for Php
➢ Lesson Objective 15,000.00. Then the company must immediately write down the
➢ Lesson Introduction
➢ Video Clip value of the asset to at Php 15,000.00 because of the lower cost
➢ Lesson Discussion in the market. But if the inventory was bought for Php 20,000.00
➢ Recap
➢ Check up Test 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.
 FUNDAMENTALS OF Discussion
ACCOUNTANCY, BUSINESS &
MANAGEMENT 1
Grade 11-ABM 11. Objectivity
Accounting Concepts & Principles
Principle In this concept, financial statements of an organization
➢ Lesson Objective
➢ Lesson Introduction
must be presented with supporting solid evidence and the intent
➢ Video Clip behind this principle is to keep the management and the
➢ Lesson Discussion
department of accounting from making financial statements that
➢ Recap
➢ Check up Test 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.
 FUNDAMENTALS OF Recap
ACCOUNTANCY, BUSINESS &
MANAGEMENT 1
Grade 11-ABM
Accounting Concepts & Principles
Summary

➢ Lesson Objective
➢ Lesson Introduction
➢ Video Clip
➢ Lesson Discussion
➢ Recap
➢ Check up Test
 FUNDAMENTALS OF Recap
ACCOUNTANCY, BUSINESS &
MANAGEMENT 1
Grade 11-ABM
Accounting Concepts & Principles
Worksheet
Directions: Match the principles with their descriptions. Write
➢ Lesson Objective
➢ Lesson Introduction the letter of your answers on a separate sheet of paper.
➢ Video Clip
➢ Lesson Discussion
➢ Recap
➢ Check up Test
 FUNDAMENTALS OF Recap
ACCOUNTANCY, BUSINESS &
MANAGEMENT 1
Grade 11-ABM 1. All relevant information should be included in the financial reports.
Accounting Concepts & Principles
2. In case of doubt, assets and income should not be overstated.
➢ Lesson Objective 3. It is the assumption that the company will continue indefinitely.
➢ Lesson Introduction
➢ Video Clip 4. All transactions in the financial statement should be supported by
➢ Lesson Discussion unbiased evidence.
➢ Recap
5. It requires that the expenses incurred during a period be recorded in the
➢ Check up Test
same period in which the related revenues are earned.
6. Minimal costs incurred that are immaterial to make difference in the
financial statement should be recorded as an expense.
7. A Philippine company should report financial statements in pesos.
8. An apartment owner should record revenue for the rental even if the
payment is not yet given to the owner.
9. Statement of Financial position should be recorded as of December 31,
2020.
10. A company that purchased furniture should record it at its acquisition
price.
 FUNDAMENTALS OF Recap
ACCOUNTANCY, BUSINESS &
MANAGEMENT 1
Grade 11-ABM
Accounting Concepts & Principles
Directions: Identify the principle describe in each item. Choose
your answers from the box. Write your answers on a separate
➢ Lesson Objective sheet of paper.
➢ Lesson Introduction
➢ Video Clip
➢ Lesson Discussion
➢ Recap
➢ Check up Test
 FUNDAMENTALS OF Recap
ACCOUNTANCY, BUSINESS &
MANAGEMENT 1
Grade 11-ABM 1. Cost should be matched with the revenue generated.
Accounting Concepts & Principles
2. All relevant and material information should be reported.
➢ Lesson Objective 3. This is also known as prudence. In this principle, assets and income
➢ Lesson Introduction
should not be overstated while liabilities and expenses should not be
➢ Video Clip
➢ Lesson Discussion understated in case of doubt.
➢ Recap 4. In this principle, assets that are immaterial to make a difference in the
➢ Check up Test
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.
 FUNDAMENTALS OF Recap
ACCOUNTANCY, BUSINESS &
MANAGEMENT 1
Grade 11-ABM
Accounting Concepts & Principles
Directions: State what accounting principle has been applied on
each number. Choose your answers from the box. Write your
➢ Lesson Objective answers on a separate sheet of paper.
➢ Lesson Introduction
➢ Video Clip
➢ Lesson Discussion
➢ Recap
➢ Check up Test
 FUNDAMENTALS OF Recap
ACCOUNTANCY, BUSINESS &
MANAGEMENT 1
Grade 11-ABM 1. The owner of a supermarket made a transaction with her friends
Accounting Concepts & Principles
for personal use, he did not let his personal transaction intrude
➢ Lesson Objective with his business.
➢ Lesson Introduction
➢ Video Clip 2. Babu believes that his business operations will continue in spite of
➢ Lesson Discussion some difficulties.
➢ Recap
➢ Check up Test 3. Vilma, a veterinarian, performs a service on Bebang's pet dog
without a payment being received. Vilma should not record the
service revenue yet.
4. Aling Violeta bought a cash register for her grocery store and she
recorded it on its price. 11
5. Mr. Lopez has his shoe branch in America and the financial records
there are in dollars.
 FUNDAMENTALS OF Recap
ACCOUNTANCY, BUSINESS &
MANAGEMENT 1
Grade 11-ABM 6. Ms. Maricar kept all the relevant information on the accounting
Accounting Concepts & Principles
firm she is working on and she ensured that everything was
➢ Lesson Objective written and recorded on the financial reports.
➢ Lesson Introduction
➢ Video Clip 7. Vien is a cashier in a supermarket. She ensures that all transactions
➢ Lesson Discussion are rightly recorded.
➢ Recap
➢ Check up Test 8. Charlie prepares financial statements yearly as what his boss
wanted.
9. Dodong bought a building for the space of his business worth Php
200,000.00. After a month, the building cost Php 300,000.00.
Dodong recorded Php 200,000.00 as the cost of his building.
10. An accounting clerk purchased a pen. Since a pen is immaterial
relative to assets, she recorded it as an expense.
 FUNDAMENTALS OF Check up Test
ACCOUNTANCY, BUSINESS &
MANAGEMENT 1
Grade 11-ABM
Accounting Concepts & Principles
Assessment

➢ Lesson Objective
➢ Lesson Introduction
➢ Video Clip
➢ Lesson Discussion
➢ Recap
➢ Check up Test
 FUNDAMENTALS OF Check up Test
ACCOUNTANCY, BUSINESS &
MANAGEMENT 1
Grade 11-ABM
Accounting Concepts & Principles

➢ Lesson Objective
➢ Lesson Introduction
➢ Video Clip
➢ Lesson Discussion
➢ Recap
➢ Check up Test
 FUNDAMENTALS OF Check up Test
ACCOUNTANCY, BUSINESS &
MANAGEMENT 1
Grade 11-ABM
Accounting Concepts & Principles

➢ Lesson Objective
➢ Lesson Introduction
➢ Video Clip
➢ Lesson Discussion
➢ Recap
➢ Check up Test
 FUNDAMENTALS OF Check up Test
ACCOUNTANCY, BUSINESS &
MANAGEMENT 1
Grade 11-ABM
Accounting Concepts & Principles
Directions: Indicate which accounting principle is violated.
Choose your answers from the box. Write your answers on a
➢ Lesson Objective separate sheet of paper.
➢ Lesson Introduction
➢ Video Clip
➢ Lesson Discussion
➢ Recap
➢ Check up Test
 FUNDAMENTALS OF Check up Test
ACCOUNTANCY, BUSINESS &
MANAGEMENT 1
Grade 11-ABM 1. George bought a racing car and as an owner and a manager of his own
Accounting Concepts & Principles
company, he gave the receipt to the accountant who recorded it as an
➢ Lesson Objective asset of the business.
➢ Lesson Introduction 2. A machine was purchased from Japan for 350,000 Yen and it was shown
➢ Video Clip
in the statement of financial position of the company. It was reported at
➢ Lesson Discussion
➢ Recap that amount while all the other assets were reported in Philippine peso.
➢ Check up Test 3. Henry Wong has no plan of preparing financial statements for his
business. He has a prediction that his business will be closed after 20
years and that is the only time that he is going to prepare the
statements.
4. Roger has a shoe store and operates a canteen. The statement of
financial position shows that the assets of the canteen are reported in
the statement of financial position of the shoe store.
5. A saw was bought by Mike Pacardo costing Php 1,000.00 and it was
immediately recorded as an asset.
 FUNDAMENTALS OF Check up Test
ACCOUNTANCY, BUSINESS &
MANAGEMENT 1
Grade 11-ABM 6. A shoe factory needed a machine for fast production, so they ordered it.
Accounting Concepts & Principles
Upon order, the machine was immediately listed as one of its assets.
➢ Lesson Objective 7. Jenny has a sari-sari store. Whenever she and her family do not have
➢ Lesson Introduction anything to eat, she will get food from her sari-sari store without paying
➢ Video Clip
for it.
➢ Lesson Discussion
➢ Recap 8. Mr. Sanchez has a kimchi business which he believes will only operate for
➢ Check up Test two years because of lack of customers.
9. Ms. Tabugan is an accountant in JYP Bookstore and she prepares financial
statements only whenever she wants.
10. Apple Salon performs a hair treatment on Mrs. Valdez on account
(without payment) but Apple, the owner, did not record the service
revenue.
 Concept
Lesson 02.1: Accounting Concepts & Principles

THE END