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Lesson 3 - Accounting Concepts and Principles

Accounting concepts and principles provide the foundation for preparing financial statements according to Generally Accepted Accounting Principles (GAAP). There are 13 key concepts and principles that ensure uniformity, including: the going concern assumption, business entity principle, time period principle, stable monetary unit principle, money measurement principle, objectivity principle, cost principle, accrual accounting principle, matching principle, adequate disclosure principle, conservatism principle, materiality principle, and double-entry principle. These concepts and principles provide rules and guidelines for accurately recognizing, measuring, classifying, and reporting financial information.

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Lizzy Balbaguio
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64 views

Lesson 3 - Accounting Concepts and Principles

Accounting concepts and principles provide the foundation for preparing financial statements according to Generally Accepted Accounting Principles (GAAP). There are 13 key concepts and principles that ensure uniformity, including: the going concern assumption, business entity principle, time period principle, stable monetary unit principle, money measurement principle, objectivity principle, cost principle, accrual accounting principle, matching principle, adequate disclosure principle, conservatism principle, materiality principle, and double-entry principle. These concepts and principles provide rules and guidelines for accurately recognizing, measuring, classifying, and reporting financial information.

Uploaded by

Lizzy Balbaguio
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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ACCOUNTIN

G CONCEPTS
AND
PRINCIPLES
CHAPTER 3
What are
Accounting
Concept or
Assumptions?
These are the very foundation of Generally
Accepted Accounting Principle (GAAP).
Without these assumptions, there could be no
uniformity in the practice of accounting which
can only result to having distorted and
meaningless financial statements
GENERALLY Good luck!

ACCEPTED
ACCOUNTING
PRINCIPLES (GAAP)
These are uniform set of accounting
rules, procedures, practices, and
standards that are followed in
preparing the financial statements.
1. Going-concern
Assumption
It gives the pretense that a business will
continue to operate in the foreseeable
future and will not be liquidated for at least
12 months. This entails that operations will
continue and settle its obligations rather
than sell its assets at low prices.
2. Business Entity Principle

It states that the business and its


owner are separate entities and
thus should be accounted in
different books
3. Time Period Principle

It divides financial statements into


specific time intervals. This makes
financial statements comparable and
eligible to be used for trend analysis.
4. Stable Monetary
Unit Principle
It requires the financial statements to be
presented in a single currency.
5. Money
measurement
Principle
It is connected to monetary
principle which ensures that
transactions are recorded and
measured by money.
6. Objectivity
Principle
This ensures that financial
statements can be verified by
having supporting evidence.
7. Cost Principle

Initially records its


transactions at cost.
8. Accrual
Accounting
Principle
It states the revenue should be
recognized when earned
regardless of collection, and
expenses should be incurred,
regardless of payment.
9. Matching
Principle
It says that cost should be
matched with revenue
generated in the given
period.
10. Adequate

Disclosure
Principle
It requires all relevant information
should be reported alongside the
financial statements for without doing
so may alter the user's understanding of
the said statements.
11. Conservatism Principle

Focuses on the idea of prudence that


income and assets should not be
overstated while liabilities and
expenses are not understated.
12. Materiality
Principle
This guides the recording of
significant and relevant
economic transactions. It
generally states that if any
transaction is not recorded, it
will impact the user's decision-
making process.
13. Double-entry
Principle

It requires that all transactions


recorded to have a debit and
credit
- END -

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