Lesson Activity

Introduce each accounting concept and discuss its relevance and

application. Use or modify the following situations and ask the
students how the concept applies:
Entity the owner of a painting company takes some paint to use in
his home renovations. Is this paint recorded as a business expense?
Money-Measurement a printing business is about to be sold to
new owners who have no experience in the industry. Is this
information recorded in the financial statements?
Going Concern a companys stock price has plummeted 70% in
the past six months due to increased industry competition. Do we
assume the company is still in business?
Cost A construction company owns two excavators and is
preparing to sell both of them in order to buy one brand new one.
The book value of the two used excavators is Php10,000, is that the
price that the owner should expect to get as a trade-in value?
Dual Aspect A company has Php40,000 in assets, owes the bank
Php12,000, and owes creditors an additional Php8,000. How much
equity does the owner have in the company?
Objectivity Have students name five different types of source
documents used for accounting purposes. Invoice, checks, bank
statement, purchase orders, cash receipts, bill of lading, loan
certificate
Time Period department stores often have fiscal years that end
Jan 31. Ask students to explain why that is the case.
Conservatism discuss the pros and cons of choosing to be
prudent when reporting income and expenses.
Realization if a toy manufacturer receives an order for 96,000
yoyos at Php2 each to be delivered in equal installments over the

next year, when would the revenue from the order be recorded?
What would the amount(s) be?
Matching a dry-cleaning company sells Php5000 worth of services
in October. They pay Php3000 for their dry-cleaning fluid and
supplies every quarter in March, June, September, and December.
What expense, if any, would be recorded in October for dry-cleaning
supplies?
Consistency discuss the importance of consistent accounting
between reporting periods.
Materiality discuss the impracticality of accounting for every
change that occurs within a business on a day-to-day basis. Use
office supplies as the most obvious example.