Why does it need principle?
Measurement of performance
Based on an unique platform
Formation of the rules of games
Impact to the Finance Department
Has to follow the rules of games in
recording transactions and reporting
For statutory reporting
For banking relationships
For gaining credit from suppliers
Thus internally, needs the collaboration
from other departments
The rules of game - restrictions
Law (法, 实施细则,暂行条例)
Listing rules (上市条例)
Accounting standards (会计准则)
GAAP(Generally Accepted Accounting Principle)
IAS (International Accounting Standards)
IFRS (International Financial Reporting Standards)
Accounting principles (会计原则)
Accounting policies (会计政策)
Accounting concept (会计概念)
Business entity concept
Company is just an individual “legal
Separate the pocket of the owner and
For the business itself:
asset = liabilities + capital
Customer expressed the intention to
At a fixed price
Delivery has occurred
Transfer of ownership and risk
Services have been rendered
Time of payment is irrelevant
Matching: revenue and cost
Record in the same period
Sales of the month
Cost for the sales
Expenses for the period
What is the cost and expense
o Goods/Service received?
o Invoice received?
o Cash paid out?
What is the sales
o Money from customer?
o Sales tax considered?
Record as costs or expenses
Paid – money paid
Payable – invoice received, not pay
Accrual – invoice not receive
Provision – risk of payment for
Accrual and Provisions
Who has the appropriate information
Goods/Services received but not invoiced
Risks of being charged in future
Help Finance in recording appropriate
costs and expenses
Help yourself in measuring your
Because everyone looks at the financial
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