SlideShare a Scribd company logo
1 of 33
Accounting Principles and
Concepts
GAAP
• Generally Accepted Accounting Principles
Generally Accepted Accounting
Principles
• GAAP- these principles are not laws, but
are guidelines determined primarily by the
Financial Accounting Standard Board
(FASB) and its predecessor, the
Accounting Principles Board (APB).
• Provide the general framework for
determining what information is included in
financial statements and how this
information is to be prepared and
presented.
Accounting Entity Principle
Accounting Entity Principle
• An accounting entity consists of people, assets, liabilities
and activities devoted to a specific economic purposes.
Accounting information is developed for clearly identified
accounting entities such as sole proprietorships,
partnerships, and corporations.
• In any of these arrangements, nonrelated business
interests are accounted for separately.
• In corporations, accounting entity coincides with the legal
entity.
• In proprietorships, it is the accounting entity but the
proprietor is the legal entity liable for both personal and
business obligations.
Going Concern Principle
Going-Concern Principle
• Assumes that an accounting entity will continue
to operate indefinitely, thus allowing a business
to defer certain costs that are to be charged
against the revenues of future periods.
Examples of such costs are undepreciated
assets, ending inventories, prepaid expenses.
For firms about to liquidate, the going concern
principle is ignored , with assets being reported
at the current liquidating value and liabilities at
the amount required to settle debts immediately.
Time Period Principle
Time Period Principle
• Financial statements are prepared for specific
relatively brief accounting periods, ordinarily one
year, in order to assists in decision making and
for tax purposes.
• The year chosen for financial measurement is
referred to as the fiscal year which does not
necessarily correspond to the calendar year but
corresponds to the natural cycle of business
activity. In addition to one year, shorter time
periods e.g. one month, months and year-to-
date also may be used for presenting financial
reports.
Monetary Principle
Monetary Principle
• States that money is the basic unit of measurement for
financial reporting. The principle gives accountants a
common denominator for adding and subtracting
heterogeneous transactions occurring at various times
during the life of an accounting entity
• The principle also allows for the comparison of financial
statements between and within firms.
• The monetary principle assumes that money is a stable
unit of value over time. However this assumption is
unrealistic because money loses its value over time.
• Another difficulty with this principle is that not all things of
value to the organization can be measured in monetary
terms.
Historical Cost Principle
Historical Cost Principle
• Involves valuing assets at the original cost of
acquiring them
• But should consider adjustments for price level
changes. These involves the use of price level
indices, e.g prescription price indices.
• An Rx drug $5.00 in 20X1 (the base year)
5.25 in 20X2
5.50 in 20X3
The price index in 20X3 is 5.50/5.00 x 100=110%
Objectivity Principle
Objectivity Principle
• Requires unbiased verifiable measurements.
The accountant seeks the most objective
evidence available in order to support financial
statements. This may include invoices, cancelled
checks, bank statements, inventory counts,
deeds and contracts and use of historical costs.
• Despite this goal, however, it is not possible to
prevent accounting data from being subject to
some bias primarily because of the existence of
alternative accounting method and future
uncertainties.
Consistency Principle
Consistency Principle
• Related to the objectivity principle. It requires
that a particular accounting technique not be
changed from period to period, thus facilitating
comparison of financial statements over time
• On occasion, however, the management will
change to a different accounting method when
the change will serve the needs of the user’s of
the statement e.g change in depreciation
method from linear to sum of years digit method.
Conservatism Principle
Conservatism Principle
• Related to the objectivity principle
• Requires the selection of accounting method
that neither overstate nor understate the facts.
• However, accounting takes place in an
environment of uncertainty. Thus where doubt
exists, the accountant selects the option that
produces the lower net income and less
favorable financial position, Use of historical cost
is an example of conservatism.
Materiality Principle
Materiality Principle
• Refers to the relative importance of an item. An item is
considered to be material if it significantly affects the
financial statements, thus influencing the decisions of
prudent users of the statements.
• Accounting transactions too small or insignificant to
affect user actions are recorded as is most expedient,
thus saving the expense of initiating a more expensive
accounting procedure.
• Materiality of an item depends not only on the amount
but also on the nature of the item. Purchase of a spatula
is an expense not a asset for depreciation.
Full Disclosure Principle
Full Disclosure Principle
• Requires that all relevant facts concerning the
financial position of a business be presented in
the financial statements. Even significant
events occurring after the end of the fiscal
period, but before release of the financial
statements should be included in the reports
• Full disclosure can be accomplished either in the
body of a financial statement or in its footnotes.
Realization Principle
Realization Principle
• Fundamental in the accrual basis of
accounting
• States that revenue is recognized when it
is realized ,i.e.when the earning process is
complete and when objective evidence
exists as to the amount of revenue earned
• Thus revenue is recognized at the time
goods are sold or services rendered.
Matching Principle
Matching Principle
• The measurement of an expense occurs in two
phases.
• The first stage involves measuring the cost of
goods and services consumed or expired in the
process of generating revenue.
• The second phase considers matching cost and
revenue and involves determining when the
goods and services acquired have contributed to
revenue, at which time their cost becomes an
expense.
Independent CPA Opinion
Independent CPA Opinion
• An audit opinion is issued by independent
certified public accountants after they have
audited the financial statements and accounting
records of a business. The opinion is published
as part of the company’s annual report.
Standard wording that consists of two
paragraphs has been developed. The first
paragraph describes the scope of the
examination and the second paragraph presents
the actual opinion.
Independent CPA Opinion
We have examined the Balance Sheet of _______Pharmacy
as of December 31, 200X and the related statements of income,
retained earnings and changes in financial position for the year then
ended. Our examination was made in accordance with generally
accepted auditing standards, and accordingly included such tests of
the accounting records and such other auditing procedures as we
considered necessary under the circumstances.
– In our opinion, the above financial statement present fairly the
financial statement position of _____Pharmacy as of December
31, 200X and the results of its operations and the changes of its
financial position for the year then ended, in conformity with
generally accepted accounting principles applied on a consistent
basis.
Independent CPA Opinion
• The statement may also include comments on
any unusual factors in the financial position.
• The primary responsibility for the accuracy of the
financial statements belong to the management .
The CPA’s task, is to render an opinion as to
fairness of the presentation. Thus, his
independent status is as important as his
technical competence in accomplishing the
auditing task.

More Related Content

Similar to BEST OF Accounting Principles and Concepts.ppt

Basic concepts and principles.pptx
Basic concepts and principles.pptxBasic concepts and principles.pptx
Basic concepts and principles.pptxDrTanushreeGupta1
 
2. concepts and conventions of accounting mba 1st tri semester
2. concepts and conventions of accounting mba 1st tri semester2. concepts and conventions of accounting mba 1st tri semester
2. concepts and conventions of accounting mba 1st tri semesterKaran Kukreja
 
Lec 1 INTRODUCTION TO FINANCIAL ACCOUNTING.pptx
Lec 1 INTRODUCTION TO FINANCIAL ACCOUNTING.pptxLec 1 INTRODUCTION TO FINANCIAL ACCOUNTING.pptx
Lec 1 INTRODUCTION TO FINANCIAL ACCOUNTING.pptxpal83111
 
Base of accounting
Base of accountingBase of accounting
Base of accountingMOHIT SHARMA
 
ABM1_Concepts and Principles.pptxABM1_Concepts and Principles.pptx
ABM1_Concepts and Principles.pptxABM1_Concepts and Principles.pptxABM1_Concepts and Principles.pptxABM1_Concepts and Principles.pptx
ABM1_Concepts and Principles.pptxABM1_Concepts and Principles.pptxjeannmontejo1
 
(MBA SEM 1) SEM 1 Accounting Principles.pptx
(MBA SEM 1) SEM 1 Accounting Principles.pptx(MBA SEM 1) SEM 1 Accounting Principles.pptx
(MBA SEM 1) SEM 1 Accounting Principles.pptxgindu3009
 
Accounting Basics.pdf
Accounting Basics.pdfAccounting Basics.pdf
Accounting Basics.pdfKEVALHINDOCHA
 
Note 2Accounting Concepts and Accounting Conventions note 2.ppt
Note 2Accounting Concepts and Accounting Conventions note 2.pptNote 2Accounting Concepts and Accounting Conventions note 2.ppt
Note 2Accounting Concepts and Accounting Conventions note 2.pptGhoshVolu
 
Finance_for_Non_Finance 2011
Finance_for_Non_Finance 2011Finance_for_Non_Finance 2011
Finance_for_Non_Finance 2011Sunil Parkar
 
Accounting Courses in chandigarh.pptx...
Accounting Courses in chandigarh.pptx...Accounting Courses in chandigarh.pptx...
Accounting Courses in chandigarh.pptx...asmeerana605
 
1.2. ACCOUNTING ASSUMPTIONS, PRINCIPLES AND CONCEPTS.pptx
1.2. ACCOUNTING ASSUMPTIONS, PRINCIPLES AND CONCEPTS.pptx1.2. ACCOUNTING ASSUMPTIONS, PRINCIPLES AND CONCEPTS.pptx
1.2. ACCOUNTING ASSUMPTIONS, PRINCIPLES AND CONCEPTS.pptxPoojaGautam89
 
Public Sector accounting.pptx
Public Sector accounting.pptxPublic Sector accounting.pptx
Public Sector accounting.pptxRuhulQuddus23
 
Accounting Presentation
Accounting PresentationAccounting Presentation
Accounting PresentationMayank Shah
 
FASB Concept stmt 5
FASB Concept stmt 5FASB Concept stmt 5
FASB Concept stmt 5seanjagg
 
Accounting for manager
Accounting for managerAccounting for manager
Accounting for managergouthamnaidu
 
LBS Introduction to Financial Accounting (1).pptx
LBS Introduction to Financial Accounting (1).pptxLBS Introduction to Financial Accounting (1).pptx
LBS Introduction to Financial Accounting (1).pptxparthwalia8
 
LBS Introduction to Financial Accounting.pptx
LBS Introduction to Financial Accounting.pptxLBS Introduction to Financial Accounting.pptx
LBS Introduction to Financial Accounting.pptxNamishGupta10
 

Similar to BEST OF Accounting Principles and Concepts.ppt (20)

Basic concepts and principles.pptx
Basic concepts and principles.pptxBasic concepts and principles.pptx
Basic concepts and principles.pptx
 
2. concepts and conventions of accounting mba 1st tri semester
2. concepts and conventions of accounting mba 1st tri semester2. concepts and conventions of accounting mba 1st tri semester
2. concepts and conventions of accounting mba 1st tri semester
 
Gaap
GaapGaap
Gaap
 
Lec 1 INTRODUCTION TO FINANCIAL ACCOUNTING.pptx
Lec 1 INTRODUCTION TO FINANCIAL ACCOUNTING.pptxLec 1 INTRODUCTION TO FINANCIAL ACCOUNTING.pptx
Lec 1 INTRODUCTION TO FINANCIAL ACCOUNTING.pptx
 
Base of accounting
Base of accountingBase of accounting
Base of accounting
 
ABM1_Concepts and Principles.pptxABM1_Concepts and Principles.pptx
ABM1_Concepts and Principles.pptxABM1_Concepts and Principles.pptxABM1_Concepts and Principles.pptxABM1_Concepts and Principles.pptx
ABM1_Concepts and Principles.pptxABM1_Concepts and Principles.pptx
 
GAAP principles
GAAP principlesGAAP principles
GAAP principles
 
(MBA SEM 1) SEM 1 Accounting Principles.pptx
(MBA SEM 1) SEM 1 Accounting Principles.pptx(MBA SEM 1) SEM 1 Accounting Principles.pptx
(MBA SEM 1) SEM 1 Accounting Principles.pptx
 
Accounting Basics.pdf
Accounting Basics.pdfAccounting Basics.pdf
Accounting Basics.pdf
 
Note 2Accounting Concepts and Accounting Conventions note 2.ppt
Note 2Accounting Concepts and Accounting Conventions note 2.pptNote 2Accounting Concepts and Accounting Conventions note 2.ppt
Note 2Accounting Concepts and Accounting Conventions note 2.ppt
 
Finance_for_Non_Finance 2011
Finance_for_Non_Finance 2011Finance_for_Non_Finance 2011
Finance_for_Non_Finance 2011
 
Accounting Courses in chandigarh.pptx...
Accounting Courses in chandigarh.pptx...Accounting Courses in chandigarh.pptx...
Accounting Courses in chandigarh.pptx...
 
1.2. ACCOUNTING ASSUMPTIONS, PRINCIPLES AND CONCEPTS.pptx
1.2. ACCOUNTING ASSUMPTIONS, PRINCIPLES AND CONCEPTS.pptx1.2. ACCOUNTING ASSUMPTIONS, PRINCIPLES AND CONCEPTS.pptx
1.2. ACCOUNTING ASSUMPTIONS, PRINCIPLES AND CONCEPTS.pptx
 
ITFT- Accounting
ITFT- AccountingITFT- Accounting
ITFT- Accounting
 
Public Sector accounting.pptx
Public Sector accounting.pptxPublic Sector accounting.pptx
Public Sector accounting.pptx
 
Accounting Presentation
Accounting PresentationAccounting Presentation
Accounting Presentation
 
FASB Concept stmt 5
FASB Concept stmt 5FASB Concept stmt 5
FASB Concept stmt 5
 
Accounting for manager
Accounting for managerAccounting for manager
Accounting for manager
 
LBS Introduction to Financial Accounting (1).pptx
LBS Introduction to Financial Accounting (1).pptxLBS Introduction to Financial Accounting (1).pptx
LBS Introduction to Financial Accounting (1).pptx
 
LBS Introduction to Financial Accounting.pptx
LBS Introduction to Financial Accounting.pptxLBS Introduction to Financial Accounting.pptx
LBS Introduction to Financial Accounting.pptx
 

More from JemalSeid25

Level Two BAsic Account PERSONAL BUDGET.pptx
Level Two BAsic Account PERSONAL BUDGET.pptxLevel Two BAsic Account PERSONAL BUDGET.pptx
Level Two BAsic Account PERSONAL BUDGET.pptxJemalSeid25
 
Bedt of training Presentations_Part_1.ppt
Bedt of training Presentations_Part_1.pptBedt of training Presentations_Part_1.ppt
Bedt of training Presentations_Part_1.pptJemalSeid25
 
chapter 01 introduction to the course.pptx
chapter 01 introduction to the course.pptxchapter 01 introduction to the course.pptx
chapter 01 introduction to the course.pptxJemalSeid25
 
Introduction to The overview of GAAP LO 1-5.pptx
Introduction to The overview of GAAP LO 1-5.pptxIntroduction to The overview of GAAP LO 1-5.pptx
Introduction to The overview of GAAP LO 1-5.pptxJemalSeid25
 
Chapter 1 Schools-Marketing-JA-Price.ppt
Chapter 1 Schools-Marketing-JA-Price.pptChapter 1 Schools-Marketing-JA-Price.ppt
Chapter 1 Schools-Marketing-JA-Price.pptJemalSeid25
 
UNIT ONE OF 2 Conceptual-Framework IFRS.pptx
UNIT ONE OF 2 Conceptual-Framework IFRS.pptxUNIT ONE OF 2 Conceptual-Framework IFRS.pptx
UNIT ONE OF 2 Conceptual-Framework IFRS.pptxJemalSeid25
 
Chapter 06 Economics power point lecture .pptx
Chapter 06 Economics power point lecture .pptxChapter 06 Economics power point lecture .pptx
Chapter 06 Economics power point lecture .pptxJemalSeid25
 
Personal aving handout and refference mm.ppt
Personal aving handout and refference mm.pptPersonal aving handout and refference mm.ppt
Personal aving handout and refference mm.pptJemalSeid25
 
Chapter 14 THE STATEMENT OF CASH FLOWS.ppt
Chapter 14  THE STATEMENT OF CASH FLOWS.pptChapter 14  THE STATEMENT OF CASH FLOWS.ppt
Chapter 14 THE STATEMENT OF CASH FLOWS.pptJemalSeid25
 
20200909-XI-Accountancy-Introduction of Accounting-1 of 2-Ppt.pptx
20200909-XI-Accountancy-Introduction of Accounting-1 of 2-Ppt.pptx20200909-XI-Accountancy-Introduction of Accounting-1 of 2-Ppt.pptx
20200909-XI-Accountancy-Introduction of Accounting-1 of 2-Ppt.pptxJemalSeid25
 
CHAPTET 15 FINANCIAL STATEMENT ANALYSIS.ppt
CHAPTET 15 FINANCIAL STATEMENT ANALYSIS.pptCHAPTET 15 FINANCIAL STATEMENT ANALYSIS.ppt
CHAPTET 15 FINANCIAL STATEMENT ANALYSIS.pptJemalSeid25
 
Chapter 10 ASSETS NATURAL RESOURCES AND INTANGIBLE ASSETS.ppt
Chapter 10 ASSETS NATURAL RESOURCES AND INTANGIBLE ASSETS.pptChapter 10 ASSETS NATURAL RESOURCES AND INTANGIBLE ASSETS.ppt
Chapter 10 ASSETS NATURAL RESOURCES AND INTANGIBLE ASSETS.pptJemalSeid25
 
Chapter 09 ACCOUNTING FOR RECEIVABLES.ppt
Chapter 09 ACCOUNTING FOR  RECEIVABLES.pptChapter 09 ACCOUNTING FOR  RECEIVABLES.ppt
Chapter 09 ACCOUNTING FOR RECEIVABLES.pptJemalSeid25
 
Internal control over cash and peety cash
Internal control over cash and peety cashInternal control over cash and peety cash
Internal control over cash and peety cashJemalSeid25
 
ch12 CORPORATIONS ORGANIZATION, STOCK TRANSACTIONS, DIVIDENDS, AND RETAINED E...
ch12 CORPORATIONS ORGANIZATION, STOCK TRANSACTIONS, DIVIDENDS, AND RETAINED E...ch12 CORPORATIONS ORGANIZATION, STOCK TRANSACTIONS, DIVIDENDS, AND RETAINED E...
ch12 CORPORATIONS ORGANIZATION, STOCK TRANSACTIONS, DIVIDENDS, AND RETAINED E...JemalSeid25
 
Parties Involved In Standard Setting GAAP.pptx
Parties Involved In Standard Setting GAAP.pptxParties Involved In Standard Setting GAAP.pptx
Parties Involved In Standard Setting GAAP.pptxJemalSeid25
 

More from JemalSeid25 (16)

Level Two BAsic Account PERSONAL BUDGET.pptx
Level Two BAsic Account PERSONAL BUDGET.pptxLevel Two BAsic Account PERSONAL BUDGET.pptx
Level Two BAsic Account PERSONAL BUDGET.pptx
 
Bedt of training Presentations_Part_1.ppt
Bedt of training Presentations_Part_1.pptBedt of training Presentations_Part_1.ppt
Bedt of training Presentations_Part_1.ppt
 
chapter 01 introduction to the course.pptx
chapter 01 introduction to the course.pptxchapter 01 introduction to the course.pptx
chapter 01 introduction to the course.pptx
 
Introduction to The overview of GAAP LO 1-5.pptx
Introduction to The overview of GAAP LO 1-5.pptxIntroduction to The overview of GAAP LO 1-5.pptx
Introduction to The overview of GAAP LO 1-5.pptx
 
Chapter 1 Schools-Marketing-JA-Price.ppt
Chapter 1 Schools-Marketing-JA-Price.pptChapter 1 Schools-Marketing-JA-Price.ppt
Chapter 1 Schools-Marketing-JA-Price.ppt
 
UNIT ONE OF 2 Conceptual-Framework IFRS.pptx
UNIT ONE OF 2 Conceptual-Framework IFRS.pptxUNIT ONE OF 2 Conceptual-Framework IFRS.pptx
UNIT ONE OF 2 Conceptual-Framework IFRS.pptx
 
Chapter 06 Economics power point lecture .pptx
Chapter 06 Economics power point lecture .pptxChapter 06 Economics power point lecture .pptx
Chapter 06 Economics power point lecture .pptx
 
Personal aving handout and refference mm.ppt
Personal aving handout and refference mm.pptPersonal aving handout and refference mm.ppt
Personal aving handout and refference mm.ppt
 
Chapter 14 THE STATEMENT OF CASH FLOWS.ppt
Chapter 14  THE STATEMENT OF CASH FLOWS.pptChapter 14  THE STATEMENT OF CASH FLOWS.ppt
Chapter 14 THE STATEMENT OF CASH FLOWS.ppt
 
20200909-XI-Accountancy-Introduction of Accounting-1 of 2-Ppt.pptx
20200909-XI-Accountancy-Introduction of Accounting-1 of 2-Ppt.pptx20200909-XI-Accountancy-Introduction of Accounting-1 of 2-Ppt.pptx
20200909-XI-Accountancy-Introduction of Accounting-1 of 2-Ppt.pptx
 
CHAPTET 15 FINANCIAL STATEMENT ANALYSIS.ppt
CHAPTET 15 FINANCIAL STATEMENT ANALYSIS.pptCHAPTET 15 FINANCIAL STATEMENT ANALYSIS.ppt
CHAPTET 15 FINANCIAL STATEMENT ANALYSIS.ppt
 
Chapter 10 ASSETS NATURAL RESOURCES AND INTANGIBLE ASSETS.ppt
Chapter 10 ASSETS NATURAL RESOURCES AND INTANGIBLE ASSETS.pptChapter 10 ASSETS NATURAL RESOURCES AND INTANGIBLE ASSETS.ppt
Chapter 10 ASSETS NATURAL RESOURCES AND INTANGIBLE ASSETS.ppt
 
Chapter 09 ACCOUNTING FOR RECEIVABLES.ppt
Chapter 09 ACCOUNTING FOR  RECEIVABLES.pptChapter 09 ACCOUNTING FOR  RECEIVABLES.ppt
Chapter 09 ACCOUNTING FOR RECEIVABLES.ppt
 
Internal control over cash and peety cash
Internal control over cash and peety cashInternal control over cash and peety cash
Internal control over cash and peety cash
 
ch12 CORPORATIONS ORGANIZATION, STOCK TRANSACTIONS, DIVIDENDS, AND RETAINED E...
ch12 CORPORATIONS ORGANIZATION, STOCK TRANSACTIONS, DIVIDENDS, AND RETAINED E...ch12 CORPORATIONS ORGANIZATION, STOCK TRANSACTIONS, DIVIDENDS, AND RETAINED E...
ch12 CORPORATIONS ORGANIZATION, STOCK TRANSACTIONS, DIVIDENDS, AND RETAINED E...
 
Parties Involved In Standard Setting GAAP.pptx
Parties Involved In Standard Setting GAAP.pptxParties Involved In Standard Setting GAAP.pptx
Parties Involved In Standard Setting GAAP.pptx
 

Recently uploaded

Production and Cost of the firm with curves
Production and Cost of the firm with curvesProduction and Cost of the firm with curves
Production and Cost of the firm with curvesArifa Saeed
 
Class XII Business Studies-Mind Maps.pdf
Class XII Business Studies-Mind Maps.pdfClass XII Business Studies-Mind Maps.pdf
Class XII Business Studies-Mind Maps.pdfshan_1900
 
20240514-Calibre-Q1-2024-Conference-Call-Presentation.pdf
20240514-Calibre-Q1-2024-Conference-Call-Presentation.pdf20240514-Calibre-Q1-2024-Conference-Call-Presentation.pdf
20240514-Calibre-Q1-2024-Conference-Call-Presentation.pdfAdnet Communications
 
一比一原版(UIUC毕业证书)UIUC毕业证香槟分校毕业证成绩单学位证书
一比一原版(UIUC毕业证书)UIUC毕业证香槟分校毕业证成绩单学位证书一比一原版(UIUC毕业证书)UIUC毕业证香槟分校毕业证成绩单学位证书
一比一原版(UIUC毕业证书)UIUC毕业证香槟分校毕业证成绩单学位证书atedyxc
 
Economic Risk Factor Update: May 2024 [SlideShare]
Economic Risk Factor Update: May 2024 [SlideShare]Economic Risk Factor Update: May 2024 [SlideShare]
Economic Risk Factor Update: May 2024 [SlideShare]Commonwealth
 
Satoshi DEX Leverages Layer 2 To Transform DeFi Ecosystem.pdf
Satoshi DEX Leverages Layer 2 To Transform DeFi Ecosystem.pdfSatoshi DEX Leverages Layer 2 To Transform DeFi Ecosystem.pdf
Satoshi DEX Leverages Layer 2 To Transform DeFi Ecosystem.pdfcoingabbar
 
Falcon Invoice Discounting: Boost Your Cash Flow Effortlessly
Falcon Invoice Discounting: Boost Your Cash Flow EffortlesslyFalcon Invoice Discounting: Boost Your Cash Flow Effortlessly
Falcon Invoice Discounting: Boost Your Cash Flow EffortlesslyFalcon Invoice Discounting
 
一比一原版(UCSB毕业证书)圣塔芭芭拉社区大学毕业证成绩单学位证书
一比一原版(UCSB毕业证书)圣塔芭芭拉社区大学毕业证成绩单学位证书一比一原版(UCSB毕业证书)圣塔芭芭拉社区大学毕业证成绩单学位证书
一比一原版(UCSB毕业证书)圣塔芭芭拉社区大学毕业证成绩单学位证书atedyxc
 
Diversification in Investment Portfolio.pdf
Diversification in Investment Portfolio.pdfDiversification in Investment Portfolio.pdf
Diversification in Investment Portfolio.pdfVighnesh Shashtri
 
First Order System Time Resphhhonse.pptx
First Order System Time Resphhhonse.pptxFirst Order System Time Resphhhonse.pptx
First Order System Time Resphhhonse.pptxjoshuaclack73
 
Bahawalpur Culture.pptx pptx pptx pttx pttx
Bahawalpur Culture.pptx pptx pptx pttx pttxBahawalpur Culture.pptx pptx pptx pttx pttx
Bahawalpur Culture.pptx pptx pptx pttx pttxAbdulNasirNichari
 
How to exchange my pi coins on HTX in 2024
How to exchange my pi coins on HTX in 2024How to exchange my pi coins on HTX in 2024
How to exchange my pi coins on HTX in 2024DOT TECH
 
How do I sell my Pi Network currency in 2024?
How do I sell my Pi Network currency in 2024?How do I sell my Pi Network currency in 2024?
How do I sell my Pi Network currency in 2024?DOT TECH
 
一比一原版(UBC毕业证书)不列颠哥伦比亚大学毕业证成绩单学位证书
一比一原版(UBC毕业证书)不列颠哥伦比亚大学毕业证成绩单学位证书一比一原版(UBC毕业证书)不列颠哥伦比亚大学毕业证成绩单学位证书
一比一原版(UBC毕业证书)不列颠哥伦比亚大学毕业证成绩单学位证书atedyxc
 
一比一原版(Caltech毕业证书)加州理工学院毕业证成绩单学位证书
一比一原版(Caltech毕业证书)加州理工学院毕业证成绩单学位证书一比一原版(Caltech毕业证书)加州理工学院毕业证成绩单学位证书
一比一原版(Caltech毕业证书)加州理工学院毕业证成绩单学位证书atedyxc
 
Slideshare - ONS Economic Forum Slidepack - 13 May 2024.pptx
Slideshare - ONS Economic Forum Slidepack - 13 May 2024.pptxSlideshare - ONS Economic Forum Slidepack - 13 May 2024.pptx
Slideshare - ONS Economic Forum Slidepack - 13 May 2024.pptxOffice for National Statistics
 
Rapport annuel de Encevo Group pour l'année 2023
Rapport annuel de Encevo Group pour l'année 2023Rapport annuel de Encevo Group pour l'année 2023
Rapport annuel de Encevo Group pour l'année 2023Paperjam_redaction
 
NO1 Popular Black Magic Specialist Expert Amil baba in Norway Poland Portugal...
NO1 Popular Black Magic Specialist Expert Amil baba in Norway Poland Portugal...NO1 Popular Black Magic Specialist Expert Amil baba in Norway Poland Portugal...
NO1 Popular Black Magic Specialist Expert Amil baba in Norway Poland Portugal...Amil Baba Dawood bangali
 
project ratio analysis of bcom studies .
project ratio analysis of bcom studies .project ratio analysis of bcom studies .
project ratio analysis of bcom studies .borndark09
 
一比一原版(Caltech毕业证书)加利福尼亚理工学院毕业证成绩单学位证书
一比一原版(Caltech毕业证书)加利福尼亚理工学院毕业证成绩单学位证书一比一原版(Caltech毕业证书)加利福尼亚理工学院毕业证成绩单学位证书
一比一原版(Caltech毕业证书)加利福尼亚理工学院毕业证成绩单学位证书atedyxc
 

Recently uploaded (20)

Production and Cost of the firm with curves
Production and Cost of the firm with curvesProduction and Cost of the firm with curves
Production and Cost of the firm with curves
 
Class XII Business Studies-Mind Maps.pdf
Class XII Business Studies-Mind Maps.pdfClass XII Business Studies-Mind Maps.pdf
Class XII Business Studies-Mind Maps.pdf
 
20240514-Calibre-Q1-2024-Conference-Call-Presentation.pdf
20240514-Calibre-Q1-2024-Conference-Call-Presentation.pdf20240514-Calibre-Q1-2024-Conference-Call-Presentation.pdf
20240514-Calibre-Q1-2024-Conference-Call-Presentation.pdf
 
一比一原版(UIUC毕业证书)UIUC毕业证香槟分校毕业证成绩单学位证书
一比一原版(UIUC毕业证书)UIUC毕业证香槟分校毕业证成绩单学位证书一比一原版(UIUC毕业证书)UIUC毕业证香槟分校毕业证成绩单学位证书
一比一原版(UIUC毕业证书)UIUC毕业证香槟分校毕业证成绩单学位证书
 
Economic Risk Factor Update: May 2024 [SlideShare]
Economic Risk Factor Update: May 2024 [SlideShare]Economic Risk Factor Update: May 2024 [SlideShare]
Economic Risk Factor Update: May 2024 [SlideShare]
 
Satoshi DEX Leverages Layer 2 To Transform DeFi Ecosystem.pdf
Satoshi DEX Leverages Layer 2 To Transform DeFi Ecosystem.pdfSatoshi DEX Leverages Layer 2 To Transform DeFi Ecosystem.pdf
Satoshi DEX Leverages Layer 2 To Transform DeFi Ecosystem.pdf
 
Falcon Invoice Discounting: Boost Your Cash Flow Effortlessly
Falcon Invoice Discounting: Boost Your Cash Flow EffortlesslyFalcon Invoice Discounting: Boost Your Cash Flow Effortlessly
Falcon Invoice Discounting: Boost Your Cash Flow Effortlessly
 
一比一原版(UCSB毕业证书)圣塔芭芭拉社区大学毕业证成绩单学位证书
一比一原版(UCSB毕业证书)圣塔芭芭拉社区大学毕业证成绩单学位证书一比一原版(UCSB毕业证书)圣塔芭芭拉社区大学毕业证成绩单学位证书
一比一原版(UCSB毕业证书)圣塔芭芭拉社区大学毕业证成绩单学位证书
 
Diversification in Investment Portfolio.pdf
Diversification in Investment Portfolio.pdfDiversification in Investment Portfolio.pdf
Diversification in Investment Portfolio.pdf
 
First Order System Time Resphhhonse.pptx
First Order System Time Resphhhonse.pptxFirst Order System Time Resphhhonse.pptx
First Order System Time Resphhhonse.pptx
 
Bahawalpur Culture.pptx pptx pptx pttx pttx
Bahawalpur Culture.pptx pptx pptx pttx pttxBahawalpur Culture.pptx pptx pptx pttx pttx
Bahawalpur Culture.pptx pptx pptx pttx pttx
 
How to exchange my pi coins on HTX in 2024
How to exchange my pi coins on HTX in 2024How to exchange my pi coins on HTX in 2024
How to exchange my pi coins on HTX in 2024
 
How do I sell my Pi Network currency in 2024?
How do I sell my Pi Network currency in 2024?How do I sell my Pi Network currency in 2024?
How do I sell my Pi Network currency in 2024?
 
一比一原版(UBC毕业证书)不列颠哥伦比亚大学毕业证成绩单学位证书
一比一原版(UBC毕业证书)不列颠哥伦比亚大学毕业证成绩单学位证书一比一原版(UBC毕业证书)不列颠哥伦比亚大学毕业证成绩单学位证书
一比一原版(UBC毕业证书)不列颠哥伦比亚大学毕业证成绩单学位证书
 
一比一原版(Caltech毕业证书)加州理工学院毕业证成绩单学位证书
一比一原版(Caltech毕业证书)加州理工学院毕业证成绩单学位证书一比一原版(Caltech毕业证书)加州理工学院毕业证成绩单学位证书
一比一原版(Caltech毕业证书)加州理工学院毕业证成绩单学位证书
 
Slideshare - ONS Economic Forum Slidepack - 13 May 2024.pptx
Slideshare - ONS Economic Forum Slidepack - 13 May 2024.pptxSlideshare - ONS Economic Forum Slidepack - 13 May 2024.pptx
Slideshare - ONS Economic Forum Slidepack - 13 May 2024.pptx
 
Rapport annuel de Encevo Group pour l'année 2023
Rapport annuel de Encevo Group pour l'année 2023Rapport annuel de Encevo Group pour l'année 2023
Rapport annuel de Encevo Group pour l'année 2023
 
NO1 Popular Black Magic Specialist Expert Amil baba in Norway Poland Portugal...
NO1 Popular Black Magic Specialist Expert Amil baba in Norway Poland Portugal...NO1 Popular Black Magic Specialist Expert Amil baba in Norway Poland Portugal...
NO1 Popular Black Magic Specialist Expert Amil baba in Norway Poland Portugal...
 
project ratio analysis of bcom studies .
project ratio analysis of bcom studies .project ratio analysis of bcom studies .
project ratio analysis of bcom studies .
 
一比一原版(Caltech毕业证书)加利福尼亚理工学院毕业证成绩单学位证书
一比一原版(Caltech毕业证书)加利福尼亚理工学院毕业证成绩单学位证书一比一原版(Caltech毕业证书)加利福尼亚理工学院毕业证成绩单学位证书
一比一原版(Caltech毕业证书)加利福尼亚理工学院毕业证成绩单学位证书
 

BEST OF Accounting Principles and Concepts.ppt

  • 2. GAAP • Generally Accepted Accounting Principles
  • 3. Generally Accepted Accounting Principles • GAAP- these principles are not laws, but are guidelines determined primarily by the Financial Accounting Standard Board (FASB) and its predecessor, the Accounting Principles Board (APB). • Provide the general framework for determining what information is included in financial statements and how this information is to be prepared and presented.
  • 5. Accounting Entity Principle • An accounting entity consists of people, assets, liabilities and activities devoted to a specific economic purposes. Accounting information is developed for clearly identified accounting entities such as sole proprietorships, partnerships, and corporations. • In any of these arrangements, nonrelated business interests are accounted for separately. • In corporations, accounting entity coincides with the legal entity. • In proprietorships, it is the accounting entity but the proprietor is the legal entity liable for both personal and business obligations.
  • 7. Going-Concern Principle • Assumes that an accounting entity will continue to operate indefinitely, thus allowing a business to defer certain costs that are to be charged against the revenues of future periods. Examples of such costs are undepreciated assets, ending inventories, prepaid expenses. For firms about to liquidate, the going concern principle is ignored , with assets being reported at the current liquidating value and liabilities at the amount required to settle debts immediately.
  • 9. Time Period Principle • Financial statements are prepared for specific relatively brief accounting periods, ordinarily one year, in order to assists in decision making and for tax purposes. • The year chosen for financial measurement is referred to as the fiscal year which does not necessarily correspond to the calendar year but corresponds to the natural cycle of business activity. In addition to one year, shorter time periods e.g. one month, months and year-to- date also may be used for presenting financial reports.
  • 11. Monetary Principle • States that money is the basic unit of measurement for financial reporting. The principle gives accountants a common denominator for adding and subtracting heterogeneous transactions occurring at various times during the life of an accounting entity • The principle also allows for the comparison of financial statements between and within firms. • The monetary principle assumes that money is a stable unit of value over time. However this assumption is unrealistic because money loses its value over time. • Another difficulty with this principle is that not all things of value to the organization can be measured in monetary terms.
  • 13. Historical Cost Principle • Involves valuing assets at the original cost of acquiring them • But should consider adjustments for price level changes. These involves the use of price level indices, e.g prescription price indices. • An Rx drug $5.00 in 20X1 (the base year) 5.25 in 20X2 5.50 in 20X3 The price index in 20X3 is 5.50/5.00 x 100=110%
  • 15. Objectivity Principle • Requires unbiased verifiable measurements. The accountant seeks the most objective evidence available in order to support financial statements. This may include invoices, cancelled checks, bank statements, inventory counts, deeds and contracts and use of historical costs. • Despite this goal, however, it is not possible to prevent accounting data from being subject to some bias primarily because of the existence of alternative accounting method and future uncertainties.
  • 17. Consistency Principle • Related to the objectivity principle. It requires that a particular accounting technique not be changed from period to period, thus facilitating comparison of financial statements over time • On occasion, however, the management will change to a different accounting method when the change will serve the needs of the user’s of the statement e.g change in depreciation method from linear to sum of years digit method.
  • 19. Conservatism Principle • Related to the objectivity principle • Requires the selection of accounting method that neither overstate nor understate the facts. • However, accounting takes place in an environment of uncertainty. Thus where doubt exists, the accountant selects the option that produces the lower net income and less favorable financial position, Use of historical cost is an example of conservatism.
  • 21. Materiality Principle • Refers to the relative importance of an item. An item is considered to be material if it significantly affects the financial statements, thus influencing the decisions of prudent users of the statements. • Accounting transactions too small or insignificant to affect user actions are recorded as is most expedient, thus saving the expense of initiating a more expensive accounting procedure. • Materiality of an item depends not only on the amount but also on the nature of the item. Purchase of a spatula is an expense not a asset for depreciation.
  • 23. Full Disclosure Principle • Requires that all relevant facts concerning the financial position of a business be presented in the financial statements. Even significant events occurring after the end of the fiscal period, but before release of the financial statements should be included in the reports • Full disclosure can be accomplished either in the body of a financial statement or in its footnotes.
  • 25. Realization Principle • Fundamental in the accrual basis of accounting • States that revenue is recognized when it is realized ,i.e.when the earning process is complete and when objective evidence exists as to the amount of revenue earned • Thus revenue is recognized at the time goods are sold or services rendered.
  • 27. Matching Principle • The measurement of an expense occurs in two phases. • The first stage involves measuring the cost of goods and services consumed or expired in the process of generating revenue. • The second phase considers matching cost and revenue and involves determining when the goods and services acquired have contributed to revenue, at which time their cost becomes an expense.
  • 28.
  • 30.
  • 31. Independent CPA Opinion • An audit opinion is issued by independent certified public accountants after they have audited the financial statements and accounting records of a business. The opinion is published as part of the company’s annual report. Standard wording that consists of two paragraphs has been developed. The first paragraph describes the scope of the examination and the second paragraph presents the actual opinion.
  • 32. Independent CPA Opinion We have examined the Balance Sheet of _______Pharmacy as of December 31, 200X and the related statements of income, retained earnings and changes in financial position for the year then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary under the circumstances. – In our opinion, the above financial statement present fairly the financial statement position of _____Pharmacy as of December 31, 200X and the results of its operations and the changes of its financial position for the year then ended, in conformity with generally accepted accounting principles applied on a consistent basis.
  • 33. Independent CPA Opinion • The statement may also include comments on any unusual factors in the financial position. • The primary responsibility for the accuracy of the financial statements belong to the management . The CPA’s task, is to render an opinion as to fairness of the presentation. Thus, his independent status is as important as his technical competence in accomplishing the auditing task.