lalala

1. ACCOUNTING
CONCEPTS &
PRINCIPLES
Basic Accounting | Module 2

2. Lesson
Outlin
e
Accounting Concepts &
Principles

3. Accrual
Accounting
revenues are recorded when earned,
and expenses are recorded when
incurred, regardless of when cash is
received or paid
Example: If you provide a service in
December but receive payment in January,
you still record the revenue in December.

4. Matching
Principle
requires that expenses be recorded in the
same period as the revenues they helped
generate
Example: If you earn ₱100 000 in sales in
March and paid ₱30 000 in advertising to
generate those sales, both must be recorded
in March.

5. Use of
Judgment &
Estimates
Accountants often make reasonable
estimates when exact data isn’t available
and must exercise professional judgmentin
areas like depreciation, bad debts, or
inventory valuation.
Example: Estimating useful life of
equipment
or expected percentage of
uncollectible receivables.

6. Prudence
(Conservatism
)
requires accountants to anticipate no profit
but recognize all possible losses
Example: If there's a chance that inventory
is obsolete, it should be written down even
if the loss hasn’t occurred yet.

7. Substance
Over Form
Transactions must be recorded according
to their true economic substance, not just
their legal form.
Example: A lease that effectively
transfers ownership should be recorded
as an asset, even if legally it’s a rental.

8. Going
Concern
Assumption
assumes that the business will continue
to operate in the foreseeable future and
not liquidate

9. Accounting
Entity
Assumption
business is treated as separate from
its owner(s) and other entities
Example: The owner’s personal groceries
are not recorded as a business expense.

10. Time Period
Assumption
assumes that a business's financial life can be
divided into specific, consistent periods
Example: Companies prepare monthly
income statements to monitor short-term
performance.

11. GAAP
Generally Accepted Accounting
Principles (GAAP)
a set of accounting standards, principles,
and procedures commonly followed in
preparing financial statements

12. IFRS & PFRS
International Financial Reporting Standards
(IFRS) - global standards developed by the
International Accounting Standards Board
(IASB)
Philippine Financial Reporting Standards
(PFRS) - the Philippine version of IFRS,
adopted and issued by the Financial
Reporting Standards Council (FRSC)

13. Let’s move on
to Cycle of
Accounts