ACCOUNTING

CONCEPTS AND
PRINCIPLES
 BASIC ACCOUNTING CONCEPTS

ACCOUNTING POSTULATES (ASSUMPTIONS)

- FUNDAMENTAL CONCEPTS/ PRINCIPLES AND BASIC
NOTIONS THAT SERVE AS THE BEDROCK OF ACCOUNTING
 BASIC ACCOUNTING CONCEPTS

I. UNDERLYING ASSUMPTION

GOING CONCERN ASSUMPTION

 BASIC ACCOUNTING CONCEPTS

II. IMPLICIT ASSUMPTIONS

• SEPARATE ENTITY (ENTITY CONCEPT)

• STABLE MONETARY UNIT
• TIME PERIOD
 BASIC ACCOUNTING CONCEPTS

III. PERVASIVE

• MATERIALITY CONCEPT

• COST – BENEFIT (REASONABLE ASSURANCE)

 BASIC ACCOUNTING CONCEPTS

IV. OTHER

• ACCRUAL BASIS OF ACCOUNTING

 BASIC PRINCIPLES OF ACCOUNTING

• MEASUREMENT
• REVENUE RECOGNITION
• EXPENSE RECOGNITION – MATCHING PRINCIPLE
• FULL DISCLOSURE
 ACCOUNTING STANDARDS

THE GENERALLY ACCEPTED ACCOUNTING

PRINCIPLES (GAAP) IN THE PHILIPPINES ARE
REPRESENTED BY THE PHILIPPINE FINANCIAL
REPORTING STANDARDS (PFRSS)
 ACCOUNTING STANDARDS

PHILIPPINE FINANCIAL REPORTING STANDARDS

(PFRSS) ARE STANDARDS AND INTERPRETATIONS
ADOPTED BY THE FINANCIAL REPORTING
STANDARDS COUNCIL (FRSC)
 ACCOUNTING STANDARDS

PHILIPPINE FINANCIAL REPORTING STANDARDS

(PFRSS) COMPISE OF:
A. PFRS ITSELF
B. PHILIPPINE ACCOUNTING STANDARDS (PASS)
C. INTERPRETATIONS
 THE CONCEPTUAL FRAMEWORK FOR
FINANCIAL ACCOUNTING AND REPORTING

THE CONCEPTUAL FRAMEWORK SETS OUT THE

CONCEPTS THAT UNDERLIE THE PREPARATION AND
PRESENTATION OF FINANCIAL STATEMENTS FOR
EXTERNAL USERS
 THE CONCEPTUAL FRAMEWORK FOR
FINANCIAL ACCOUNTING AND REPORTING

SCOPE:
1. OBJECTIVE OF FINANCIAL REPORTING
2. QUALITATIVE CHARACTERISTICS OF USEFUL INFORMATION
3. ELEMENTS(DEFINITION,RECOGNITION AND
MEASUREMENT)
4. CONCEPTS OF CAPITAL AND ITS MAINTENANCE
 THE CONCEPTUAL FRAMEWORK FOR
FINANCIAL ACCOUNTING AND REPORTING

OBJECTIVE OF GENERAL PURPOSE FINANCIAL

REPORTING
- PROVIDE FINANCIAL INFO. THAT IS USEFUL IN
MAKING DECISIONS ABOUT PROVIDING RESOURCES
TO THE ENTITY
 QUALITATIVE CHARACTERISTICS

I. FUNDAMENTAL
1. RELEVANCE 2. FAITHFUL REPRESENTATION
A. PREDICTIVE VALUE A. COMPLETENESS
B. CONFIRMATORY VALUE B. NEUTRALITY
C. MATERIALITY C. FREE FROM ERROR
 QUALITATIVE CHARACTERISTICS

II. ENHANCING
1. COMPARABILITY
2 . VERIFIABILITY
3. TIMELINESS
4. UNDERSTANDABILITY
 BASIC ACCOUNTING EQUATION

ASSETS = LIABILITIES + EQUITY

“RESOURCES” “OBLIGATIONS”
 BASIC ACCOUNTING EQUATION

ASSETS LIABILITIES + EQUITY

ASSETS LIABILITIES EQUITY
100,000 80,000 20,000
100,000 60,000 40,000
100,000 50,000 50,000
100,000 30,000 70,000
100,000 10,000 90,000