ACCOUNTING CONCEPT AND

PRINCIPLES
KELOMPOK 3

Adinda Kesuma Febria

Anggra Dwi Handayani
Noormadani Safitri
Rizky Amelia
Siti Husnah
Accounting practices rest on certain guidelines or rules. The
rules that govern how accountant measure, process, and
communicate financial information are the GAAP, which
stands for Generally Accepted Accounting Principles. GAAP
includes not only principle, but also concept and method that
identify the proper way to produce accounting information.
GAAP are very much like the law, a set of rules for conducting
behavior in a way acceptable, to the majority of people.
 Some of the most important accounting
concepts in financial reporting are as
follows
The Entity Concept. The most basic concept in accounting is that of the entity. An accounting
entity is an organization or a section of an organization that stands apart from its owners or
other organization as a separate economic unit. From the accounting perspective, sharp
boundaries are drawn around each entity so as not to confuse its affairs with those of other
entities. If this assumption were not made, personal activities of the owner would be merge
with the transaction of their businesses, thus combining the affairs of two separate and distinct
unit. The resulting financial statement constructed to report the business’s financial health and
profitability, therefore, would not be meaningful.
The entity assumption also notes that a firm should be viewed aside and apart from other
firms. If a company has three subsidiaries, the three subsidiaries should considered separate
economic units with their own financial reports.
The Reliability (or Objective) Principle. Accounting records and statements are based on the
most reliable fact available so that they will as accurate and useful as possible. Reliable data are
verifiable. They may confirmed by any independent observer. Ideally, then, accounting record
based on information that are documented by objective evidence. Evidence of the cost, of the
goods, services and resources normally exits in the form of contracts, accounting documents
and canceled check. Without the reliability principle, also called objective principle, accounting
record would be based on whims and opinions and would be subject to dispute.
The cost Principle. This principle holds that asset and service that are acquired should be recorded at
their actual cost; the acquisition or historical cost. Even though the purchaser may believe the price
paid is bargain, the item is recorded at the price paid in the transaction. The cost principle also holds
that the accounting should maintain this historical cost of an asset for as long as the business holds
the asset. Why? Because cost is a reliable measure.