GOING CONCERN

Continuity
Indefinitely
It is in this assumption that financial statements are
normally prepared.
Thus assets are normally recorded at cost, and market
value is ignored
ACCOUNTING ENTITY
Is the specific business organization
Which may be a proprietorship, partnership or
corporation.
The entity is separate from its owners, managers, and
employees who constitute the entity.
Transactions of the entity shall not be merged with the
transactions of the owners.
TIME PERIOD
The indefinite life of an entity is subdivided into
accounting periods which are usually of equal length
for the purpose of preparing financial statements.
Accounting period or fiscal period is one year or a
period of twelve months.
MONETARY UNIT
Quantifiability aspect means that the assets,
liabilities, equity, income and expenses should be
stated in terms of a unit of measure which is the peso
in the Philippines.
Stability of the pesos assumption means that the
purchasing power of the peso is stable or constant and
that its instability is insignificant and therefore may be
ignored.
Is the provision of financial information about an
entity to external users that is useful to them in
making economic decisions and for assessing the
effectiveness of the entitys management.
OBJECTIVE OF FINANCIAL
REPORTING

To provide financial information about the reporting
entity that is useful to existing and potential investors,
lenders and other creditors in making decisions about
providing resources to entity. It is directed primarily to
the existing and potential investors, lenders and other
creditors which compose the primary user group.
SPECIFIC OBJECTIVE OF FINANCIAL
REPORTING
To provide information useful in making decisions
about providing resources to entity.
To provide information useful in assessing the
prospects of future net cash flows to the entity.
To provide information about the entity resources,
claims and changes in resources and claims.
ECONOMIC RESOURCES AND
CLAIMS
Financial position is information about the entitys
economic resources and the claims against the
reporting entity.
Financial resources are the assets
Claims are the liabilities and equity of the entity.
CHANGES IN ECONOMIC
RESOURCES AND CLAIMS
General purpose financial reports also provide
information about the effects of transactions and other
events that change the entitys economic resources and
claims.
Changes in financial resources and claims result from
the entitys financial performance and from other
events or transactions, such as debt or equity
instruments.
LIMITATION OF FINANCIAL
REPORTING
General purpose financial reports do not and cannot
provide all of the information that existing and
potential investors, lenders and other creditors need.
General purpose financial reports are not designed to
show the value of an entity but they provide
information to help the primary users estimate the
value of the entity.
General purpose financial reports are intended to
provide common information to users and cannot
accommodate every request for information.
QUALITATIVE CHARACTERISTICS OF
FINANCIAL REPORTING

Are the qualities or attributes that make financial
accounting information useful to the users
Relevance
Financial information is capable of making a
difference in the decisions made by users.
Capacity of the information to influence a decision.
Financial information should be related and pertinent
to the economic decision
Materiality
Is a practical rule in accounting which dictates that
strict adherence to GAAP is not required when the
items are not significantly enough to affect the
evaluation.
Materiality is a relativity. Materiality of an item
depends on its relative size rather than absolute size.
Faithful Representation
Means that financial reports represent economic
phenomena or transactions in words and numbers.
Stated differently, the description s and figures match
what really existed or happened.
Means actual effects of the transactions shall be
properly accounted for and reported in the financial
statements.

Completeness

Requires that relevant information should be present
in a way that facilitates understanding and avoids
erroneous implication. Completeness is the result of
the adequate disclosure standard or the principle of
full disclosure.
Adequate Disclosure
Means that all significant and relevant information
leading to the preparation of financial statements shall
be clearly reported.
It does not mean disclosure of any data.
The rule is that accountant shall disclose a material
fact known to him which is not disclosed in the
financial statements but disclosure of which is
necessary in order that the statements would not be
misleading.
Neutrality
A neutral depiction is without bias in the selection or
presentation of financial information.
To be neutral, the information contained in the
financial statements must be free form bias. The
financial information should not favor one party to the
detriment of another party.
Substance over form
Economic substance of transactions and events are usually
emphasized when economic substance differs from legal
form.
Example, when the lessee leased property from the
lessor. The term of the lease among others, provide
that the lease transfer ownership of the asset to the
lessee by the end of the lease term. In form, the
contract is a lease, but in substance, in reality, if the
transfer of ownership provision is to be considered, the
real intent of the parties is an installment purchase of
property by the lessee from the lessor.
Comparability
Ability to bring together for the purpose of noting
points of likeness and difference.
May be made within an entity or between and across
entities.
Consistency
Requires that the accounting methods and practices
should be applied on a uniform basis from period to
period.
In a broad sense, it refers to the use of the same
method for the same item, either from period to
period within the entity or in a single period across
entities.
In a limited sense, it is the uniform application of
accounting method from period to period within an
entity.

Understandability
Requires that financial information must be
comprehensible or intelligible if it is to be most useful.
Accordingly, the information should be presented in a
form and expressed in terminology that a user
understands.
Verifiability
Means that different knowledgeable and independent
observers could reach a consensus, although not
necessarily complete agreement, that a particular
depiction is a faithful representation.
Verifiable financial information provides results that
would be substantially duplicated by measurers using
the same measurement method.
Timeliness
Means having information available to decision
makers in time to influence their decisions.
Timeliness requires that financial information must be
available or communicated early enough when a
decision is to be made.