FUNDAMENTALS

OF ACCOUNTANCY, BUSINESS
AND MANAGEMENT 1
https://www.youtube.com/watch?v=lolfhKy7hQk&t=8s
ACCOUNTING CONCEPTS
AND PRINCIPLES
 OBJECTIVES
Enumerate the principles of
Accounting

Differentiate each principles

Apply the Accounting Principles in

a business setting.
 V I EW
R E
Who are the internal users of accounting?
Who are the external users of accounting?
 JUAN
BARBER SHOP
Am I going to record
all these expenses in
my business?

He is not sure if he should include the following

items as expenses:

Salary expense P10,000

Barber Shop Rent expense P10,000
House Rent expense P 8,000
Home Electric Bill expense P 5,000
Shop's Electric Bill expense P 3,000
Shop's Water Bill expense P 500
Withdrawals P10,000
TOTAL P46,500
Salary expense P10,000
Barber Shop Rent expense P10,000
House Rent expense P 8,000
Home Electric Bill expense P 5,000
Shop's Electric Bill expense P 3,000
Shop's Water Bill expense P 500
Withdrawals P10,000
TOTAL P46,500

50 0
33 ,
P
Generally Accepted Accounting Principles (GAAP) is the
basis of the conventions, rules, and procedures needed to
establish an accepted accounting practice applicable in the
current society. Accounting principles specifically, governs
how an organization prepares its financial documents, it
ensures that all accountants who are following it maintains
consistency and transparency in their accounting practice. It
should be noted that Accounting principles unlike the
principles of physics, chemistry, etc. are not derived from the
fundamental truths of nature. Instead it is undergoing
continuous development. These principles have been
improved and modified through common usage by
accountants all over the world.
BUSINESS ENTITY
PRINCIPLE
GOING CONCERN
PRINCIPLE
TIME PERIOD
PRINCIPLE
MONETARY UNIT
PRINCIPLE
OBJECTIVITY
PRINCIPLE
 COST
PRINCIPLE
 ACCRUAL
ACCOUNTING
PRINCIPLE
MATCHING
PRINCIPLE
DISCLOSURE
PRINCIPLE
CONSERVATION
PRINCIPLE
MATERIALITY
PRINCIPLE
INDEPENDENT ACTIVITY 1:
Agree or Disagree. On your answer sheet write AGREE if you find statement to be true otherwise, write
DISAGREE

1. The time period principle is the idea that a business will continue to operate for the foreseeable future,
barring any unexpected events.

2. The full disclosure accounting principle ensures that accountants include all of the necessary
information in an organization's financial documents.

3. According to the monetary unit principle, a local business in the country can use dollars and pesos
simultaneously in stating accounts

4. Cost principle applies on situation where transactions are recorded using receipts and vouchers

5. Under the matching principle, all expenses will be recorded with their related revenue.

6. An organization's transactions should remain separate from any transactions of other organizations or
business owners.

7. In case of doubt, expenses should be recorded at a lower amount. Revenue should be recorded at a
higher amount.

8. Philippine companies are required to report financial statements weekly

9. Accounting principles are derived from fundamental truths of Nature

10.When a pet shop receives an electricity bill, it should record it as an expense only if it is unpaid.
 
INDEPENDENT ACTIVITY 2:

Matching Type. Refer to the word bank and match the words with the following
statements
1. Minimal costs incurred should be recorded as an expense.
2. A Philippine company should report financial statements in pesos.
3. A barber who performs services for a client should record revenue.
4. Statement of Financial position should be recorded as of December 31, 2015.
5. A company that purchases furniture should record it at its acquisition price.
6. All relevant information should be included in the financial reports
7. In case of doubt, assets and income should not be overstated.
8. Assume that the company will continue indefinitely.
9. All transactions should be supported by unbiased evidence.
10. Expenses should be recorded in the period when the revenue is generated.
 
 
WORD BANK
  Going concern principle Cost principle Matching principle
  Conservatism principle Objectivity principle Materiality principle
  Monetary unit principle Disclosure principle Time period principle
  Accrual accounting principle
 
 
 
 
 
 
 
 
 
 
 
INDEPENDENT ACTIVITY 3:
Situational. On your answer sheet, indicate which principles are violated

1. The owner-manager bought a computer for personal use. The invoice was
given to the accountant who recorded it as an asset of the business.
2. The statement of financial position of a company included an equipment
purchased from Japan for 350,000 yen. It was reported at that amount in the
statement of financial position while all the other assets were reported in
Philippine pesos.
3. No financial statements were prepared by Michael Go for his business. He
explained that he will prepare the statements when he closes the business,
which he predicts to take place after 20 years.
4. Aside from owning a shoe store, Albert operates a canteen. The assets of the
canteen are reported in the statement of financial position of the shoe store.
5. Purchased a hammer at a cost of PHP500. This was recorded as an asset and
expense to decrease its value by PHP50 per year for 10 years.
6. A food company ordered a machine needed in the assembly line of its
production department. Upon order, the machine was immediately listed as
one of its assets
7. Mr. dela Cruz, bought two Vans for P1,000,000 each on Mall A to be used for
hauling of his merchandise. He found out that at Mall B a Van cost P900,000
because of this he declared on his financial statement that his newly
acquired Vans cost P9000,000 each
8. Mr. dela Cruz's businesse might lose large contracts with its customers to its
competitor. And the subsequent loss of contract could turn his business into
bankruptcy. He decided not to inlude this in his financial statements
9. A barber finished performing his services he waits the customer to pay him at a
later date before he records his service as revenue
10.Company ABC filed a lawsuit against Company XYZ. Company ABC is confident
they will win a settlement of P300,000. Company ABC declares the P300,000 as
their gain in their financial statement.
11. Mr. Salvador operates a bar at Boracay catering tourists that usually pays in
dollars. He wanted to make his Financial Statement presentable so he decided to
report his assets, liabilities and equity in dollars.
12.The salary expense for EFG merchandising from October 2019 to March 2020 is
reported in 2019
13.Ms. Salazar bought a blender at full price for her bakery. This Blender has a life
expectancy of 5 years. Ms. Salazar does not account for the blender's depreciation
because she thinks her business will not run for more than 5 years
14. A company incurs a meal expense every time they celebrate but does not keep
the receipts from the restaurants.
15.A baker waits his associate to pay their water utility bill before he record it as an
expense
 C TI ON
REFLE
Directions: In your own words, complete the following statement. Write your
answer on your answer sheet
 
1.) In this lesson I learned about ________________________________
 
2.) Accounting principles are ________and includes _________________
 
3.) Accounting Principles are important because_____________________
 
4.) I can apply what I learn by __________________________________
 
 ASSESSMENT
 
MULTIPLE CHOICE. Choose the letter that best describe the given
situation. Write the letter of your choice on your answer sheet.

1. The accounting guideline that requires financial statement information to be

supported by independent, unbiased evidence other than someone's belief or
opinion is the:
a. Business entity principle c. Going-concern principle
b. Monetary unit principle d. Objectivity principle
 
2. The principle that requires every business to be accounted for separately and
distinctly from its owner or owners is known as the:
a. Objectivity principle c. Going-concern principle
b. Business entity principle d. Revenue recognition principle
 
3. The rule that requires financial statements to reflect the assumption that the
business will continue operating instead of being closed or sold, unless
evidence shows that it will not continue, is the:
a. Going-concern principle c. Objectivity principle
b. Business entity principle d. Cost Principle

4. To include the personal assets and transactions of a business's owner in the
records and reports of the business would be in conflict with the:
a. Objectivity principle c. Business entity principle
b. Realization principle d. Going-concern principle

5. The objectivity principle:

a. means that information is supported by independent, unbiased evidence
b. means that information can be based on what the preparer thinks is true
c. means that financial statements should contain information that is optimistic
d. means that a business may not re-organize revenue until cash is received

6. Marian Mosely is the owner of Mosely Accounting Services. Which

accounting principle requires Marian to keep her personal financial information
separate from the financial information of Mosely Accounting Services?
a. Monetary unit principle c. Cost principle
b. Going-concern principle d. Business entity principle
7. Which of the following accounting principles would require that all goods
and services purchased be recorded at cost?
a. Going-concern principle c. Cost principle
b. Continuing-concern principle d. Business entity principle

8. GAAP stands for :

a. Generally Accepted Accounting Principles
b. General Accounting Assessment Procedures
c. Generally Accounted and Applicable Principles
d. Granting Acceptance And Principles

9. Accounting Principles…
a. does not change over time and are fundamental truths in the universe
b. are mere suggestions and can be ignored given the situation
c. are continually developed through repeated usage by accountants all over
the world
d. are the product of mistakes and experimentation
10. According to Conservatism principle when in doubt, gains must be reported
__ and losses must be reported ___ to avoid misinformation on financial
statements.
a. high, low c. low, high
b. high, high also d. low, low also

11. Disclosure principle says that a company must report _____ information in

its financial documents.
a. all c. least
b. necessary d. most

 12. If expenses are not directly linked to business revenue, they are included
on the statement from the period in which they are used or expired. What
principle governs this
a. Matching principle c. Materiality Principle
b. Accrual Accounting Principle d. Cost principle
13. An accountant records an expense when the payment was made, resulting
in a delay based on the payment terms of the vendor. This is not in
accordance with
a. Matching principle c. Materiality Principle
b. Accrual Accounting Principle d. Cost principle

14.  Following the Business Entity principle warrants that

a. the business has a separate account from the owner’s own resources
b. the monetary value of each resource that the owner owns is accounted for
c. every expense made by the owner is recorded with timeliness
d. there is no conflict on recording expense and revenue

15.  Going concern principle ensures that the business will run for 10 or more
years
a. True c. True if Cost principle is not applied
b. False d. None of the above