BASIC ACCOUNTING PRINCIPLES

LEARNING OBJECTIVES:

• Introduce the basic principles of accounting.

• Explain the rationale behind each principles.
 ACCOUNTING

Accounting is the systematic process of recording,

summarizing, analyzing, and reporting the financial
transactions related to a business to aid in decision-making. 
ACCOUNTING
PRINCIPLES

Rules and standards followed in

reporting financial information.
 1. MONETARY UNIT
PRINCIPLE
3. GOING CONCERN
• Accounting is only concerned • Business will remain in

ACCOUNTING with money transactions. operation for the foreseeable

ASSUMPTIONS • A business should only future

record transactions that can
be stated in terms of a unit or
Foundation of the accounting currency
framework. These are the
generally accepted practices and
2. ECONOMIC ENTITY 4. TIME PERIOD
customs which have been • Transactions of a business • business should report the

adopted over time. should be kept separate from results of its operations over
those of its owners and other a standard period of time
businesses.
 5. REVENUE RECOGNITION 7. FULL DISCLOSURE
• A business entity should only • A business entity should

ACCOUNTING recognize revenue when the include in or alongside the

CONCEPTS business has substantially financial statements of a

completed the earnings business all of the
process. information that may impact
These are specific guidance on a reader's understanding of
how particular business 6. ACCRUAL PRINCIPLE those statements.
transactions should be reported • Accounting transactions
in financial statements should be recorded in the
8. HISTORICAL COST
accounting periods when • A business entity should only
they actually occur, rather record its assets, liabilities,
than in the periods when and equity investments at
there are cash flows their original purchase costs.
associated with them.
 9. MATERIALITY 11. CONSISTENCY
• A business entity should • Apply same methods of

ACCOUNTING record a transaction in the recording transactions each

CONSTRAINTS accounting records if not year.

doing so might have altered
12. COST-BENEFIT
the decision making process • The cost of applying an
These are principles that modify of someone reading the
accounting principles should
or constrain accounting company's financial
not be more than the benefit
assumptions and concepts in
10.statements.
PRUDENCE/ derived from them.
certain situations.
CONSERVATISM 13. OBJECTIVE EVIDENCE
• should record expenses and
• Transactions should have
liabilities as soon as possible,
adequate documentary
but to record revenues and
evidence.
assets only when you are
sure that they will occur.
PHILIPPINE FINANCIAL
REPORTING STANDARDS
(PFRS)
The Philippine Financial Reporting Standards
(PFRS)/Philippine Accounting Standards (PAS) are
the new set of Generally Accepted Accounting
Principles (GAAP) issued by the Accounting
Standards Council (ASC) to govern the
preparation of financial statements. These
standards are patterned after the revised
International Financial Reporting Standards (IFRS)
and International Accounting Standards (IAS)
issued by the International Accounting Standards
Board (IASB).
PHILIPPINE PUBLIC SECTOR
ACCOUNTING STANDARDS
The Philippine Public Sector Accounting
Standards (PPSAS) are the new set of Generally
Accepted Accounting Principles (GAAP) adopted
thru COA Resolution No. 2014-003 dated January
24, 2014 to govern the preparation of financial
statements in the public sector. These standards
are patterned after the International Public Sector
Accounting Standards (IPSAS).
QUESTIONS/
CLARIFICATIONS?
REFERENCES:

• https://www.coa.gov.ph/
• https://www.ifrs.org
• https://www.double-entry-bookkeeping.com
• https://www.accountingtools.com/