Q3/W2

SHS
Fundamentals of
Accountancy, Business,
and Management 1

Quarter 3
Learning Activity Sheet 2
Accounting Concepts and Principles
Negros Occidental High School

Government Property
NOT FOR SALE
Fundamentals of Accountancy, Business, and Management 1
Activity Sheet No. 2
First Edition, 2022

Published in the Philippines

By the Department of Education
Region 6 – Western Visayas

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Development and Enhancement Team of Fundamentals of

Accountancy, Business, and Management 1 Activity Sheet
Negros Occidental High School
Senior High School

Writer: John Rey B. Andicoy

Cover Page Designer: Deyru J. Morancil

Quality Assurance Team: Paul Andro T. Emberso

Maximo F. Torrento, Jr.
Rizzalyn Mae G. Mendoza
Eunice A. Malala

School Management Team: Donna Bella O. Aposaga

Asst. Principal II for Academics, SHS

Josette S. Terrora
Principal IV

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Introductory Message
Welcome to Fundamentals of Accountancy, Business, and Management 1 Learning
Activity Sheet (LAS) on Accounting Concepts and Principles!

The Learning Activity Sheet is a product of the collaborative efforts of the Schools
Division of Negros Occidental and DepEd Regional Office VI - Western Visayas
through the Curriculum and Learning Management Division (CLMD). This is
developed to guide the learning facilitators (teachers, parents and responsible adults)
in helping the learners meet the standards set by the K to 12 Basic Education
Curriculum.

The Learning Activity Sheet is self-directed instructional materials aimed to guide

the learners in accomplishing activities at their own pace and time using the
contextualized resources in the community. This will also assist the learners in
acquiring the lifelong learning skills, knowledge and attitudes for productivity and
employment.

For the learning facilitator:

The Fundamentals of Accountancy, Business, and Management 1 Activity Sheet

will help you facilitate the leaching-learning activities specified in each Most Essential
Learning Competency (MELC) with minimal or no face-to-face encounter between you
and learner. This will be made available to the learners with the references/links to
ease the independent learning.

For the learner:

The Fundamentals of Accountancy, Business, and Management 1 Activity Sheet

is developed to help you continue learning even if you are not in school. This learning
material provides you with meaningful and engaging activities for independent
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perform the activities and answer the assessments. This will be returned to your
facilitator on the agreed schedule.

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Learning for classroom
Activity use,(LAS)
Sheets scholarship, research, and
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 Name of Learner: ________________________________________
Grade, Strand & Section: ____________________ Date: ________

FUNDAMENTALS OF ACCOUNTANCY, BUSINESS, AND

MANAGEMENT 1 ACTIVITY SHEET
Accounting Concepts and Principles

I. I. Learning Competencies with Code

 explain the varies accounting concepts and principles (ABM_FABM11-IlIb-c-

15)
 solve exercises on accounting principles as applied in various cases
(ABM_FABM11-IlIb-c-16)

II. II. Background Information for Learners

FUNDAMENTAL CONCEPTS OF ACCOUNTING

Several fundamental concepts underlie the accounting process. In recording
business transactions, accountants should consider the following:
Entity Concept. 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. Each entity should
be evaluated separately.
Periodicity Concept. An entity’s life can be meaningful subdivided into equal
time periods for reporting purposes. This concept allows the users to obtain
timely information to serve as a basis on making decisions about future
activities. For the purpose of reporting to outsiders, one year is the usual
accounting.
Stable Monetary Unit Concept. The Philippine peso is a reasonable unit of
measure and that is purchasing power is relatively stable. It allows accountants
to add and subtract peso amounts as though each peso has the same
purchasing power as any other peso at any time. This is the basis for ignoring
the effects of inflation in the accounting records.
Accrual Basis. Accruals accounting depicts the effects of transactions and
other events and circumstances on a reporting entity’s economic resources and
claims in the periods in which those effects occur, even if the resulting cash
receipts and payments occur in a different period.

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 NEED FOR GENERALLY ACCEPTED ACCOUNTING PRINCIPLE
In a sole proprietorship, adherence to proper accounting rules is important even
though the owner is usually deeply involved in the firm’s activities and is the
person primarily interested in its financial affairs. However, creditors, suppliers
and others must also be able to rely on the financial statements prepared for a
sole proprietorship. When the business is a partnership or a corporation, it is
even more important that operations be properly accounted for because owners
are unlikely to be intimately involved in the activities of the firm. Generally
accepted accounting principles make financial statements meaningful and
useful, regardless of the type of business organization.

The various needs for reliable financial information can be satisfied only if there
are rules, procedures, and principles of accounting that are generally accepted
and used. If each entity made its own rules, there could be no basis for
comparing the earnings and financial position of different firms. Even the
records and reports of a particular entity could not be compared for different
periods unless accounting principles were applied consistently. In addition,
users of financial statements would probably be misinformed and misled.

CRITERIA FOR GENERAL ACCEPTANCE OF AN ACCOUNTING

PRINCIPLE
The general acceptance of an accounting principle usually depends on well it
meets the three criteria: relevance, objectivity, and feasibility.
A principle has the relevance to the extent that it results in information that is
meaningful and useful to those who need to know something about a certain
organization.
A principle has the objectivity to the extent that the resulting information is not
influenced by the personal bias or judgment of those who furnish it. Objectivity
connotes reliability and trustworthiness. It also connotes verifiability, which
means that there is some way of finding out whether the information is correct.
A principle has the feasibility to the extent that it can be implemented without
undue complexity or cost. These criteria often conflict with one another. In some
cases, the most relevant solution may be the least objective and the least
feasible.

ACCOUNTING PRINCIPLES
Accounting practices follow certain guidelines. The set of guidelines and
procedures that constitute acceptable accounting practice at a given time is
GAAP, which stands for Generally Accepted Accounting Principles. In order
to generate information that is useful to the users of financial statements,
accountants rely upon the following principles:

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Objectivity Principle. Accounting records and statements are based on the
most reliable data available so that they will be as accurate and as useful as
possible. The financial statements must be presented with supporting evidence.
Examples: * When the customer paid ABC Company for their order, the company
should have a copy of the receipt to represent as evidence.
* When a company incurred a transportation expense, a voucher should
be prepared as evidence.
Historical Cost. 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.
Example: * When company X buys a cash register machine, it should record the
machine at its price when they bought it.
Accrual Accounting Principle. The accounting principle on accrual accounting
says, revenue should be recognized when earned regardless of collection, and
expenses should be recognized when incurred regardless of payment. On the
other hand, the cash basis principle in which revenue is recorded when collected
and expense should be recorded when paid is not considered as GAAP today.
Example: * When a barber finishes performing his services, he should record it as
revenue. When the barber shop receives an electricity bill, it should
record it as an expense even if it is unpaid.
Adequate Disclosure. Requires that all relevant information that would affect
the user’s understanding and assessment of the accounting entity be disclosed
in the financial statements.
Example: *Ricky recorded the broken materials he received two weeks ago.
Materiality Principle. It depends on the size and nature of the item judged in
the particular circumstances of its omission. In case the assets are immaterial
to make a difference in the financial statements, the company should instead
record it as an expense.
Example: * A school purchased an eraser with an estimated useful life of three
years. Since an eraser is immaterial relative to assets, it should be
recorded as an expense.
Consistency Principle. 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.
Business Entity Principle. This principle states that a business enterprise is
separate and distinct from its owner or investor.
Examples: * If the owner has a barber shop, the cash of the barber shop should be
reported separately from the personal cash of the owner.
* The owner had a business meeting with a prospective client. The
expenses that come with that meeting should be part of the
company’s expenses. If the owner paid for gas for his personal use, it
should not be included as part of the company’s expenses.
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Going Concern Principle. The business is expected to continue indefinitely.
Example: * When preparing financial statements, you should assume that the entity
will continue indefinitely.

Time Period Principle. The financial statements are to be divided into specific
time intervals.
Examples: * Philippine companies are required to report financial statements
annually.
* The salary expenses from January to December 2021 should only be
reported in 2021. A one year cycle must be observed.

Monetary Unit Principle. Amounts are stated into a single monetary unit.
Examples: * ABC Store should report financial statements in pesos even if they
have a store in the United States.
* IHOP should report financial statements in dollars even if they have a
branch here in the Philippines.

Matching Principle. This principle refers to the situation in which the cost
should be matched with the revenue generated.
Example: * When you provide tutorial services to a customer and there is a
transportation cost incurred related to the tutorial services, it should
be recorded as an expense for that period.

Conservatism Principle. It is also known as prudence. In case of doubt, assets

and income should not be overstated while liabilities and expenses should not
be understated.
Example: * In case of doubt, expenses should be recorded at a higher amount.
Revenue should be recorded at a lower amount.

III. Accompanying DepEd Textbook and Other References

 Andres, C.S., et.al, 2016 Teaching Guide for Senior High School
Fundamentals of Accountancy, Business and Management 1. Quezon City,
Philippines. CHED. EC-TEC Commercial.
 Ballada, Win, et.al, 2017 Fundamentals of Accountancy, Business and
Management 1 Made Easy. Suite 203 KB Arizona Tower, 838 Padre Campa
St., Espana, Sampaloc, 1015 Manila, Philippines. Domdane Publishers.
 Lumangyao, Terence Adelle D., First Edition, 2020 Quarter 3 Module 3 on
Accounting Guidelines. Department of Education – Region VI.
 Hermosa, Manuel L., First Edition, 2020 Quarter 1 Module 3 on Accounting
Concepts and Principles. Department of Education – National Capital Region.

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III. IV. Activity Proper

ACTIVITY 1 Identify and Complete Me!

Directions: Identify and explain the accounting principles applied or violated in
various cases by completing the given table below. Give a brief
explanation that support to your answer.

Accounting
Case/Situation Principles Explanation
Applied/Violated
1. A large company with an average total
assets of ₱20,000,000 purchases a
digital camera worth ₱2,500 with an
estimated useful life of 2 years. The
company uses it immediately instead of
recording as an asset and depreciating
over its useful life. What accounting
principle must be applied?
2. Jane is a retailer and wishes to report her
merchandise inventory based on its retail
value. Which accounting principle is
violated?

ACTIVITY 2 Case Analysis

Directions: Read and analyze the case carefully. Answer the following
questions: (1) Which amounts cited below do you think should not
be included as expenses in Petness First Petshop financial
reports? Explain your answers.

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 ₱500,000. The business
earned ₱50,000 but he had doubts about the recorded expense of ₱60,000. He
is not sure if he should include the following items as expenses:

Salary expense 25,000

Rent expense 10,000
Utilities expense (at home) 5,000
Utilities expense (at the store) 10,000
Insurance expense 5,000
Withdrawals 5,000

TOTAL 60,000

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Guide Questions:
 What is the periodicity concept? Why is it important for business entities to
provide periodic information?
 What is meant by the concept of stable monetary unit? Is this assumption
realistic? Why is it used in accounting?
 What does the term generally accepted accounting principles mean?

V. Reflection

Based on your own understanding, what is accounting concepts and

principles all about? Explain.
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________

VI. Answer Keys

ACTIVITY 1
Accounting
Case/Situation Principles Explanation
Applied/Violated
1. A large company with an Materiality Considering the total assets of the
average total assets of Principle company, a digital camera worth
₱20,000,000 purchases a ₱2,500 is relatively a small amount
digital camera worth ₱2,500 and should be recorded as expense.
with an estimated useful life Even if the said camera will be used for
of 2 years. The company several years, it may not be recorded
uses it immediately instead as an asset because of its
of recording as an asset and insignificance to the company. The
depreciating over its useful materiality principle states that if an
life. What accounting item is immaterial, the accountant has
principle must be applied? the option to treat it differently than its
usual treatment.
2. Jane is a retailer and wishes Historical Cost The historical cost principle will be
to report her merchandise Principle violated if Jane wishes to record her
inventory based on its retail inventory based on its retail value. This
value. Which accounting principle states that the assets should
principle is violated? be recorded at their cost or acquisition
price since it is more relevant and
reliable.
ACTIVITY 2
POSSIBLE RESPONSES
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 since it is a personal expense
Utilities expense (store) Should be included since 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 withdrawals is for personal use.

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 WEEKLY HOME LEARNING PLAN
Subject: FABM 1 Quarter: Third Week No.: 2 LAS No.: 2 a
Formative Summative Learning Task
Day
Learning Mode of Learning Task Date of Mode of
and MELC
Tasks (Self- Delivery Submission Delivery
Time
Test)
Feb.  explain the varies  Read the Messenger  Answer the Feb. 21, Messenger
18, accounting Lesson Print Summative 2022 Print
2022 concepts and and Test No. 2
principles answer and
1:00PM (ABM_FABM11- Activities Performance
- IlIb-c-15) 1 - 2 on Task No. 2
5:00PM  solve exercises your on the
on accounting FABM 1 Answer
principles as notebook. Sheet (MDL-
applied in various  Check Print) and on
cases your the
(ABM_FABM11- answers Study
IlIb-c-16) using the Notebook for
Answer MDL-Digital
Keys.  Take a
 Answer picture on
the your answer
Reflection and send it
on your thru a
FABM 1 private
notebook. message on
messenger

7
 Fundamentals of Accountancy, Business and Management 1
Summative Test No. 2 (Week 2) – Accounting Concepts and Principles
Directions: Choose the letter of the correct answer. Write the chosen letter on
the answer sheet provided.
1. Which accounting principle should be considered if the owner of a business
takes goods from inventory for his personal use?
A. accrual accounting principle C. going concern principle
B. business entity principle D. historical cost principle
2. Which accounting principle states that acquired assets should be recorded at
their actual cost and not at what management thinks they are worth?
A. consistency principle C. going concern principle
B. historical cost principle D. materiality principle
3. It is an accounting principle that requires financial statement information to
be supported by independent, unbiased evidence other than someone’s belief
or opinion.
A. accrual accounting principle C. historical cost principle
B. consistency principle D. objectivity principle
4. Maria is the owner of an accounting firm which named after her as Maria
Accounting Firm and Services. Which accounting principle requires Maria to
keep her personal financial information to be separated from her accounting
firm business?
A. business entity principle C. going concern principle
B. conservatism principle D. monetary unit principle
5. Rachi expanded her shoe business in Singapore. After a year, she reported
her financial statements in pesos even if Rachi’s shoe business is located in
other countries. What accounting principle did she adhere to?
A. business entity principle C. going concern principle
B. conservatism principle D. monetary unit principle
6. The inventories were sold on credit for ₱250,000. The credit sales were
immediately recorded as accounts receivable rather than waiting for it to be
paid. What accounting principle is illustrated by the statement?
A. accrual accounting principle C. historical cost principle
B. consistency principle D. monetary unit principle
7. Which among the following concepts of accounting is the basis for ignoring
the effects of inflation in the accounting records?
A. accrual basis C. periodicity concept
B. entity concept D. stable monetary unit concept
8. It is the most basic concept in accounting.
A. accrual basis C. periodicity concept
B. entity concept D. stable monetary unit concept
9. Which of the following criteria for general acceptance of an accounting
principle that connotes reliability and trustworthiness?
A. feasibility B. objectivity C. relevance D. significance

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10. Which accounting principle requires that all relevant information that would
affect the user’s understanding and assessment of the accounting entity be
disclosed in the financial statements?
A. accrual accounting principle C. business entity principle
B. adequate disclosure principle D. consistency principle
11. The principle that requires financial statements to reflect the assumption that
the business will continue operating instead of being closed or sold unless
evidence shows that it will not continue. What principle does it imply?
A. business entity principle C. going concern principle
B. conservatism principle D. monetary unit principle
12. This principle is also known as prudence. What principle is it?
A. business entity principle C. going concern principle
B. conservatism principle D. monetary unit principle
13. Mario acquired a printing machine for his business. The regular selling price
is ₱100,000, however, he was able to acquire it at a discounted price of
₱90,000. The said machine was recorded at its acquisition cost of ₱90,000.
What accounting principle did Mario adhere?
A. conservatism principle C. going concern principle
B. historical cost principle D. materiality principle
14. Which of the following principles refers to the situation in which the cost
should be matched with the revenue generated.
A. historical cost principle C. materiality principle
B. matching principle D. monetary unit principle
15. The acronym GAAP stands for what?
A. Generally Accepted Accountant Principles
B. Generally Accepted Accounting Principles
C. Generally Accrual Accounting Principles
D. Generally Adopted Accounting Principles

Direction: On your answer sheet, write TRUE if the statement is correct, and
FALSE if the statement is incorrect.
16. The periodicity concept allows the users to obtain timely information to serve
as a basis on making decisions about future activities.
17. Generally accepted accounting principles make the financial statement
useless to any type of business organization.
18. A principle has relevance to the extent that it can be implemented without
undue complexity or cost.
19. All companies in the Philippines are required to report their financial
statements annually. The statement follows a time period principle.
20. The historical cost principle states that all acquired assets should be
recorded at their actual cost.

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 Fundamentals of Accountancy, Business and Management 1
Performance Task No. 2 (Week 2) – Accounting Concepts and Principles
Case Analysis: Read and analyze the case carefully and answer the following
questions: (1) Cite only five (5) amounts which you think must
be included in the business reports. (2) What are your bases
for including the said amounts?
The owner, Juan dela Cruz, invested ₱10,000 cash and borrowed ₱50,000 to
start his business. He purchased a photocopying machine for ₱30,000 and
supplies for ₱10,000 respectively. He paid two months’ rent for ₱10,000, salary
for ₱4,000, and the business permit for ₱2,000. The business consumed
electricity for ₱2,500 to be paid on the following month. During the first month
of his business operation, the photocopying service generated a revenue of
₱10,000.
AMOUNTS TO BE INCLUDED
BRIEF EXPLANATION
IN THE BUSINESS REPORTS
It is included in the business report since it is
Ex. ₱10,000 cash part of Juan’s starting capital to operate his
photocopying business service.
1.
2.
3.
4.
5.

RUBRIC FOR PERFORMANCE TASK NO. 2

10 8 6 4 2
Some
All contents contents were
All contents All contents
included were missing and
included were included were
explained not explained
somehow not explained
correctly. The well. Student There were
explained well. well. Student
student shows does not no contents
Student shows shows little
CONTENT in depth demonstrate and
understanding understanding
understanding an explanation
of the of the
of the understanding s at all.
accounting accounting
accounting of the
concepts and concepts and
concepts and accounting
principles. principles.
principles. concepts and
principles.
The answers The answers The answers The answers
were were were not were not
completely completely completely completely
provided. No provided. provided. No provided. No answers
COMPLETENESS
erasures were There are erasures were There were were found
AND NEATNESS
found on the some erasures found on the some at all.
final output. found on the final output. erasures
final output. found on the
final output.

10
 Fundamentals of Accountancy, Business and Management 1
Summative Test No. 2 (Week 2) – Accounting Concepts and Principles
Answer Sheet
Name of Learner: __________________________________________________________
Grade, Strand & Section: _________________________________ Date: _____________
1. 6. 11. 16.
2. 7. 12. 17.
3. 8. 13. 18.
4. 9. 14. 19.
5. 10. 15. 20.

Fundamentals of Accountancy, Business and Management 1

Performance Task No. 2 (Week 2) – Accounting Concepts and Principles
Answer Sheet

AMOUNTS TO BE INCLUDED
BRIEF EXPLANATION
IN THE BUSINESS REPORTS

1.

2.

3.

4.

5.