SHSAcounBM1 Module 1 Challenge #1
Name: Franze Beatriz Flores
LEARNING MATRIX TABLE ON ACCOUNTING PRINCIPLES AS APPLIED IN BUSINESS SITUATION
Accounting Principles
Cost Principle
From an accountant's point of view, the term
"cost" refers to the amount spent (cash or the cash
equivalent) when an item was originally obtained,
whether that purchase happened last year or thirty
years ago. For this reason, the amounts shown on
financial statements are referred to
as historical cost amounts.
Time Period / Periodicity Concept
The time period principle is the concept that a
business should report the financial results of its
activities over a standard time period, which is
usually monthly, quarterly, or annually.
The business entity concept is important for a
variety of reasons including the following:
Separate Entity Concept
The business entity concept states that the
transactions associated with a business must be
separately recorded from those of its owners or
other businesses.
SENIOR HIGH SCHOOL | ABM |
Section: A12-02
Business Applications
The principle is used in the business to determine
the amount of money used in the acquisition of
property, equipment, supplies, among others. It is
essential in the business operations in order to
account the acquired assets.
The time period assumption enables business
organizations to stop and see how successful they
have been in achieving their objectives during a
particular period of time and where the room for
improvement exists.
 Business performance of various segments
or divisions is measured separately.
 Audit becomes an easier process if
separate financial records are maintained.
If the records of different business units
were intermingled, it would be a
nightmare for the auditors to perform their
evaluations.
Source of Information
https://www.accountingcoach.com/accounting-
principles/explanation
https://www.accountingtools.com/articles/the-
time-period-principle
https://www.accountingformanagement.org/time-
period-assumption/
https://www.accountingtools.com/articles/what-
is-the-business-entity-concept.html
https://www.carboncollective.co/sustainable-
investing/business-entity-concept
Your Learning
I realized that cost principle is very important in the
business operations and in recording business
transactions because it provides the guide in
determining the amount and cost to be recorded in the
financial statement.
I learned that periodicity concept plays a pivotal role in
business because it allows for organized and systematic
financial reporting and analysis. This accounting
principle forms the foundation for accurately
measuring and reporting a company's financial
performance over time.
I learned that separate entity concept plays a crucial
role in the world of business as it allows for the clear
delineation of ownership in a business. It enables
individuals to invest in a business as shareholders or
partners while keeping their personal finances separate.

Going Concern Concept
The going concern concept states that a business
will continue its operations for the foreseeable
future. This implies that the company will not be
forced to discontinue its operations and liquidate
its assets at extremely low costs.
Accrual Concept
Accrual basis accounting recognizes business
revenue and matching expenses when they are
generated—not when money actually changes
hands.
Monetary Unit Concept
Under the monetary unit assumption, it is
assumed that only those transactions with
monetary value or can be expressed in terms of a
currency should be recorded in the books of
accounts.
Matching Principle
The matching principle requires that revenues and
any related expenses be recognized together in the
same reporting period.
SENIOR HIGH SCHOOL | ABM |
 Each business unit is taxed separately.
 If a company violates this principle,
comparing its financial performance of it
with others in the industry would become
difficult.
The going concern concept is crucial for calculating
how much a company should lessen its expenses or
sell its assets. Moreover, it aids the company in
delaying a few prepaid payments until future
accounting periods. So, this concept enables the
company to use its assets effectively.
With the accrual accounting method, companies get
a real-time view of how much money is coming in.
In addition, companies can project future financial
reports. It is also easy to prepare cash flow
statements and recognize financial trends with the
accrual accounting method. Companies can stay in
the loop and be updated about their finances.
In today's global business environment, many
companies operate in multiple countries and deal
with various currencies. The monetary unit concept
facilitates the conversion of foreign currency
transactions into the reporting currency, ensuring
consistency in financial reporting and helping
stakeholders understand the company's financial
position and performance.
Companies distribute assets equally over time and
match them to balance the cost because of the
principle. This helps assets avoid depreciation.
Depreciation is the loss of value in assets.
https://www.carboncollective.co/sustainable-
investing/going-concern-concept
https://www.wallstreetmojo.com/going-concern-
concept/#:~:text=The%20going%20concern
%20concept%20is%20crucial%20for
%20calculating%20how%20much,to%20use
%20its%20assets%20effectively.
https://www.netsuite.com/portal/resource/
articles/accounting/accrual-basis-
accounting.shtml
https://www.accountingdepartment.com/blog/the-
benefits-of-accrual-accounting-for-your-business
https://www.financestrategists.com/accounting/
accounting-concepts-and-principles/monetary-
unit-assumption/
https://www.accountingtools.com/articles/the-
matching-principle
https://www.indeed.com/career-advice/career-
development/matching-principle-definition-and-
I learned that going concern concept guides the way a
stakeholders make informed decisions. If a company
were to ignore the going concern concept and assume it
might cease operations in the near future, it would
paint a misleading picture of its financial health. By
adhering to this concept, a company can maintain
credibility and trust among its stakeholders.
I learned that the accrual concept is of paramount
importance in business because it enables better
decision-making by providing timely and relevant
financial information. Managers can assess the
performance of various departments or projects based
on accrued revenues and expenses, helping them make
informed choices about resource allocation, cost
control, and growth strategies.
I learned that the monetary unit concept is crucial in
business because it facilitates the aggregation and
comparison of financial data. Businesses engage in
numerous transactions daily, involving various assets,
liabilities, and equity. By expressing these diverse
elements in a single monetary unit, typically the local
currency, it becomes much easier to combine and
analyze these financial elements.
I learned that the matching principle is crucial in
business because it enhances the transparency of a
business's financial statements. By associating
expenses with the revenues, they helped generate
during the same period, stakeholders, such as investors,

There are many benefits to be had by using the full
disclosure principle in accounting. For example:
Full Disclosure Principle
The full disclosure principle requires companies
to disclose all transactions between yourself and
anyone else (including employees), including any
assets, liabilities, or income/expenses.
SENIOR HIGH SCHOOL | ABM |
 Financial statements become easier to
understand, to compare, and make
decisions on.
 It improves the reputation and goodwill of
a company as it shows the investors that
the company is willing to disclose and
does not intend to hide anything.
 Indoctrinates best practices in the industry.
 It is important from an audit standpoint.
creditors, and even the management, gain a more
accurate and holistic understanding of the company's
examples
profitability. This transparency fosters trust and
confidence in the financial statements.
https://www.financestrategists.com/accounting/
accounting-concepts-and-principles/full-
disclosure-principle/#:~:text=You%20apply
I learned that the full disclosure principle holds
%20this%20principle%20by,undisclosed
significance in the business world as it fosters
%20transactions%20on%20financial
confidence in business organizations, benefiting both
%20statements.
the company itself and the broader economy.
https://www.carboncollective.co/sustainable-
investing/full-disclosure-principle