Accounting Principles

The same accounting procedure must be followed in the same way in each accounting period.

• Consistency

• Materiality

• Objectivity

• Conservatism

The revenue from business activities and the expenses associated with earning that revenue are recorded in the same accounting period.

• Matching Principle

• Periodicity

• Historical Cost

• Full Disclosure

An accounting standard can be ignored if the net impact of doing so has such a small impact on the financial statements that a reader of the financial statements would not be misled.

• Materiality

• Objectivity

• Full Disclosure

• Conservatism

Business transactions are reported in numbers that have common values—that is, using a common unit of measurement.

• Money Measurement

• Entity Concept

• Revenue Recognition

• Matching Principle

Financial statements are prepared with the expectation that a business will remain in operation indefinitely.

• Going Concern

• Consistency

• Conservatism

• Matching Principle

The Corona Limited Co. has three plants nationwide that cost a total of P200 million. The current fair value of the plants is P600 million. The plants will be recorded and reported as assets at:

• P200 M

• P400 M

• P600 M

• P800 M

Information is based on actual costs incurred in transactions.

• Business Entity Concept

• Matching Principle

• History Cost Principle

• Full Disclosure

Mr. Philip Pines is the owner of a beauty spa and wellness salon. He bought a residential house which he included in the balance sheet of a beauty spa and wellness salon. This is a violation of accounting principle.

• Business Entity

• Going Concern

• Conservatism

• Objectivity

On June 25, Galing Repair Shop rendered service shop to a client for P600. The service fee was collected July 4. The bookkeeper recorded the revenue on June 25.

• Revenue Recognition

• Matching Principle

• History Cost

• Objectivity

These are broad, general statements or “rules” and “procedures” that serve as guides in the practice of accounting

• Accounting Principles

• Accounting Ethics

• General Accounting Procedures

• Professionalism