BK1

This principle states that acquired assets should be recorded at their actual cost and not at what management thinks they are worth as at reporting date.

Revenue is to be recognized in the accounting period when goods are delivered or services are rendered or performed.

Expenses should be recognized in the accounting period in which goods and services are used up to produce revenue and not when the entity pays for those goods and services.

Requires that all relevant information that would affect the user’s understanding and assessment of the accounting entity be disclosed in the financial statements.

The firms should use the same accounting method from period to period to achieve comparability over time within a single enterprise. However, changes are permitted if justifiable and disclosed in the financial statements.

Financial reporting is only concerned with information that is significant enough to affect evaluations and decisions. Materiality depends on the size and Nature of the item judged in the particular circumstances of its omission. In deciding whether an item or an aggregate of items is material, the nature and size of the item could be the determining factor.

The most basic concept in accounting. An accounting entity is an organization or a section of an organization that stands apart from other organizations and individuals as a separate economic unit. Simply put, the transactions of other entities should not be accounted for together.

An entity’s life can be meaningfully subdivided into equal time periods for reporting purposes. This concept allows the users to obtain timely information to serve as a basis on makinig decisions about future activities. For purposes of reporting, one year is the usual accounting period.

The Philippine peso is a reasonable unit of measure and that its purchasing power is relatively stable.

Under the accrual basis of accounting, the effects of transactions and other events are recognized when they occur and not as Cash is received or paid. This meant that the accountant records revenues as they are earned and expenses as they are incurred.

The accountant does not record transaction unti cash is received or paid. Generally, Cash receipts are treated as revenues and cash payments as expenses.

The financial statements are normally prepared on the assumption that an enterprise is a going concern and will continue in operation for the foreseeable future. Hence, it is assumed that the enterprise has neither the intention nor the need to liquidate nor curtail materiality the scale of its operations.

Are the basic assumptions, riles of operation, and essential characteristics that make up the framework for the construction of accounting statements.

Are economic resources of value that is owned by the business. This commonly includes Cash, receivables, inventory, land, building, machinery and furniture.

Are economic or legal obligations that a business owe to other businesses or individuals. This commonly includes account payable, notes payable, payables to government and unpaid (accrued) expenses.