BASIC CONCEPT OF ACCOUNTING THEORY

Generally basic concept is conceptualization environment characteristic of a

place where financial report are applied. Because basic concept based on the
environment, different resource of basic concept will state different basic
concept, There are several resources of the basic concept, include; Ikatan
Akuntansi Indonesia (IAI), Grady, Accounting Principle Board, Wolk, Tearney, and
Dodd, Anthony, Hawkins, dan Merchant, and Paton and Littleton.
P&L have the most complete basic concept, there are:
1. Economic Entity Concept it means that a company is single economic body
that stand by their self and the position is separated with the investor. So, the
company is as center of activity.
2. Limitation of unity (batas kesatuan) even though economic entity is
acknowledge as juridical, in accounting side we only acknowledge as
economically. So we treat it by economically.
3. Equity Definition, Equity or capital is an obligation of a company to the
investor.
4. Income Definition, Income is the inflow or the increase amount of asset
that happens because of the company activity to sell goods or provides
services.
5. Cost Definition, cost is the decreasing amount of asset or the
increasing(exist) of obligation that can be explain by economic entity
concept.
6. Double entry accounting is logic consequences or descendant from
economic entity concept. Because business relation between management
and owner force the management to responsible to the asset of company and
the source of asset itself.
7. Accounting Equation is how to present the double entry, in other to
prepare financial statement by fast, accounting system should be organized
based on this equation ( A = K+E+P-B+I-D)
8. Articulation, there will always be indicated that earnings in the income
statement will be the same as the statement of changes in equity earnings
and the number of dollars equity change statement in the end would be
equal to the amount of equity in the balance sheet of the rupiah.
9. Going Concern, Going concern assuming that the company is not expected
to be liquidated in the future which can be known from now on.
10.Important Meaning of periodic report, unity of effort can be viewed as
the center of the stream of income and expense that goes on continuously.
the unity of effort can change the sources of economic development into one
another on an ongoing basis to provide goods or services.
11.The position of the Income Statement, Partial income and expenses for a
given period poured in income statement periodic so that income is seen as
the most important statement in the financial reporting because of the rate of
profit in order to assess the power of profit.
12.The functions of the balance sheet and an assessment of the
element,. balance sheet serves to demonstrate the potential of the service
which still owned the unity of effort to generate revenue in the next period.
13.Measured Consideration, this concept States that the amount of rupiah
appreciation or agreed involved in each transaction or exchange activities is
basic accounting processes to the most objective especially in measuring
economic development resource and a source of economic development that
goes out.
14.The proper term, if in each of the phrase "measured consideration" is
replaced with the cost or value, so will occur is wrong interpretation. Although
cost does not fit correctly to replace measured; P & L eventually interpret the
cost as "measured consideration" as long as the cost is defined in terms of
the most widely.
15.Service behind the costs,. Behind the row of accounting figures contained
potential physical or intangible services nonissues. The potential of such a
service is the power, ability, capacity or if the Exchange can give rise to
power, capability, or other capacity of its strength at least equal to that
previously owned the company that presented in the form of cost.
16.Accounting Information Limitation, when making decision it also need
qualitative and subjective data, we cannot only use accounting data.
17.The costs inherent, stating that the costs attached to objects in the
representation so, boarders are easy to move and could be broken up or
merged-merge back follows the object attached..
18.Additional value acknowledgement, we acknowledge additional value
when we combine the inherent cost and another cost (labor, machine, etc.)
that exist in production process.
19.Merge of container, in production processes costs are divided, categorized
then finally merged to get the total cost.
20.Effort and result, concept that sated that we do an effort to get a result
(profit).
21.Need of Association basic, Basic required proper and rational associations
between the two components (the effort and results) of profit in order to have
meaning or value as reliable performance measurement.
22.Ideal association and practiced measurement, here we will measure
cost and profit by using measurement that objective and precise.
23.Accounting profit VS economic profit, formally profit is distinction
between income cost, because some reasons include basic concept and
definition accounting define profit materially.
24.Actual cost, cost that exist because of actual activity.
25.Accrual basis, acknowledge income when we hand product/service,
acknowledge cost when we use economic source that attached in product or
service.
26.Depreciation, depreciation is part of cost asset calculated as expenses,
27. Idle capacity, no possibility to segregate in the income statement
section of the current year depreciation which represents capacity idle.
28. Extraordinary post, are windfall gains and extraordinary losses.
29. Verified and objective evidence, financial information should have
high reliability that can be tested by objective evidence and the truthiness.
30. Impotence of audit, to determine the reliability and properness of
financial information.
31. Evidence objectivity, evidence should be strong and verified to show
the truthiness.
32. Relative objectivity, accounting data is customized with objectivity
the circumstances that existed at the time of the determination of the facts is
not the absolute objectivity.
33. Long term Verified and objectivity, verified evidence basic concept
containing variability elements the make every evidence have objectivity
level.
34. Assumption, is as based to choose relevance previous concept
(going concern, period, etc)

Another basic concept that not mentioned by P&L that also important

1. The substance rather than the form, in other to setting the concept or
standard, accounting substance focus is in economical not juridical. Although
Juridical substance also required specific accounting treatment.
2. The recognition of private property rights, the recognition of private
property rights should be protected or recognized legally.
3. Diversity of Accounting between entity,. The uniqueness of the unity
of effort thus requires a different accounting treatment of financial
information in order to better describe the State of the actual business unit
4. Conservatism, Conservatism is the attitude or flow in the face of
uncertainty to take action or the decision on the basis of the ugliest pop-up
from the uncertainty.
5. Internal controls ensure the reliability of the Data, This concept
States that adequate internal control system is a means to get information of
Indonesia for high reliability.