ACCOUNTING CONCEPTS

AND PRINCIPLES

Prepared by: Marilyn C. Papina

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S R P I L C I NE P
GAAP
A widely accepted set of rules,
concepts and principles referred to
as the Generally Accepted
Accounting Principles (GAAP)
governs the application of
accounting procedures.
The GAAP has been developed by the
accounting professionals to guide
prepares of financial statements in
recording and reporting financial
information regarding a business
enterprise, hence aiding in the effective
execution of the accounting procedure
and in communicating the financial
condition of the business.
PRINCIPLES OF ACCOUNTING

ECONOMIC ENTITY PRINCIPLE

The business is considered a separate
entity, so the activities of a business
must be kept separate from the
financial activities of its business
owners.
PRINCIPLES OF ACCOUNTING

MONETARY UNIT PRINCIPLE

Amounts are stated into a single

monetary unit
PRINCIPLES OF ACCOUNTING

GOING CONCERN PRINCIPLE

Business is expected to
continue indefinitely.
PRINCIPLES OF ACCOUNTING

OBJECTIVITY PRINCIPLE
Financial statements must be
presented with supporting
evidence.
PRINCIPLES OF ACCOUNTING

TIME PERIOD PRINCIPLE

Financial statements are to be
divided into specific time
intervals.
PRINCIPLES OF ACCOUNTING

COST/HISTORICAL COST PRINCIPLE

Accounts should be recorded

initially at cost. Items should be
recorded as the actual price paid.
PRINCIPLES OF ACCOUNTING
ACCRUAL ACCOUNTING PRINCIPLE/
REVENUE RECOGNITION PRINCIPLE
Revenue should be recognized when
earned regardless of collection and
expenses should be recognized when
incurred regardless of payment.
PRINCIPLES OF ACCOUNTING

DISCLOSURE PRINCIPLE

All relevant and material

information should be reported.
PRINCIPLES OF ACCOUNTING

CONSERVATISM PRINCIPLE
Also known as prudence. In case of
doubt, assets and income should not
be overstated while liabilities and
expenses should not be understated.
PRINCIPLES OF ACCOUNTING
MATCHING PRINCIPLE

Cost should be matched

with the revenue generated
and should be reported in
the same time period
PRINCIPLES OF ACCOUNTING
MATERIALITY PRINCIPLE
In case of assets that are
immaterial to make a difference
in the financial statements, the
company should instead record
it as an expense.
IDENTIFICATION:

Identify the Principles

of Accounting being
described in each item.
•______1. All relevant information should
be included in the financial reports.
•______2. In case of doubt, assets and
income should not be overstated.
•______3. Assume that the company will
continue indefinitely.
• ______4. All transactions should be supported by
unbiased evidence.
• ______5. Expenses should be recorded in the period
when the revenue is generated.
• ______6. The personal assets of the owner of a
company will not appear on the company's
balance sheet.
• ______7. A Philippine company should report financial
statements in pesos.
______8. A barber who performs services for a
client should record revenue.
______9. Statement of Financial position should
be recorded as of December 31, 2015.
______10. A company that purchases furniture
should record it at its acquisition price.