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Accounting Concepts and Principles
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  • Slide 1
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    Accounting Concepts and Principles

    Text
  • Slide 2
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  • Slide 3
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    Petness First Petshop

    • Juan dela Cruz opened his pet shop business called Petness First Petshop. He opened a bank account for his business and deposited PHP500,000. The business earned PHP50,000 but he had doubts with the recorded expense of PHP60,000. He is not sure if he should include the following items as expenses:

    • Salary expense 20,000

    • Rent expense 10,000

    • Utilities expense (at home) 15,000

    • Utilities expense (at the store) 10,000

    • Insurance expense 5,000

    • Withdrawals 10,000


  • Slide 4
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    Petness First Petshop

    • Salary expense – it should be included since it is related to the operations of the business

    • Rent expense – it should be included since the rent is for the business

    • Utilities expense (home) – should not be included; it is a personal expense

    • Utilities expense (store) – should be included; it is an expense of the business

    • Insurance expense – should be included since the insurance is for the business

    • Withdrawals – should not be included since the withdrawal is for personal use

  • Slide 5
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    Accounting Concepts and Principles

    • Business entity principle

    • Going concern principle

    • Time period principle

    • Monetary unit principle

    • Objectivity principle

    • Cost principle

    • Accrual Accounting Principle

  • Slide 6
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    Accounting Concepts and Principles

    • Matching principle

    • Disclosure principle

    • Materiality principle

    • Conservatism principle

  • Slide 7
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    Business Entity Principle

    A business enterprise is separate and distinct from its owner or investor.

  • Question 8
    20 seconds
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    Q.

    The business and its owners are the same for the purpose of accounting.

    answer choices

    True

    False

  • Question 9
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    Q.

    Personal transactions of owners should not be mixed with business transactions.

    answer choices

    True

    False

  • Question 10
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    Q.

    Capital contributed by the owners is a liability of the business.

    answer choices

    True

    False

  • Question 11
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    Q.

    Financial statements are prepared from the perspective of the ____________.

    answer choices

    Business

    Owners

  • Slide 12
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    Scenario:

    Covida is the owner of a small shop that sells indoor plants.

    While organizing the accounting record of her business, she noticed some payment receipts and tickets in her purse that were omitted from the last year’s expense total.

    Can you help Covida in deciding which of the following are business expenditures and which ones are personal payments?

  • Question 13
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    Q.

    Ticket to a movie that Covida watched with her friend.

    answer choices

    Business

    Personal

  • Question 14
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    Q.

    Invoice of Covida’s latest shopping spree.

    answer choices

    Business

    Personal

  • Question 15
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    Q.

    Ticket to a conference that Covida visited to improve her knowledge of growing indoor plants.

    answer choices

    Business

    Personal

  • Question 16
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    Q.

    Ticket to a circus carnival that Covida visited.

    answer choices

    Business

    Personal

  • Question 17
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    Q.

    Invoice for the purchase of plants for the home.

    answer choices

    Business

    Personal

  • Question 18
    20 seconds
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    Q.

    Invoice for a lunch with a client that was interested in hiring Covida for the supply of indoor plants for a project.

    answer choices

    Business

    Personal

  • Slide 19
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    Going Concern Principle

    A business is expected to continue indefinitely.

  • Slide 20
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    Time Period Principle

    Financial statements are to be divided into specific time intervals.

  • Slide 21
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    Monetary Unit Principle

    Amounts are stated into a single monetary unit

  • Slide 22
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    Objectivity Principle

    Financial statements must be presented with supporting evidence.

  • Slide 23
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    Cost Principle

    Accounts should be recorded initially at cost.

  • Slide 24
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    Accrual Accounting Principle

    Revenue should be recognized when earned regardless of collection and expenses should be recognized when incurred regardless of payment.

  • Slide 25
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    Matching Principle

    Cost should be matched with the revenue generated.

  • Slide 26
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    Disclosure Principle

    All relevant and material information should be reported.

  • Slide 27
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    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.

  • Slide 28
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    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.

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