MODULE IN ACCOUNTING 1 – WEEK 4
ACCOUNTING CONCEPTS AND PRINCIPLES
LESSON OBJECTIVES
At the end of the lesson, the students are able to:
Explain the various accounting concepts and principles;
Apply accounting concepts and principles in real-life situationsr
PRE-ASSESSMENT
Direction :
Identify the accounting concept or principle that should be used in each situation. Write your
answer on the blank space provided/
_________1. The accountant records the values of the acquired computer units at the
prevailing price
_________2. All transactions are recorded in pesos.
_________3. The accountant groups the current and long term liabilities and assets in the
financial statements.
_________4. The accountant records contingent liability that the company might incur in a
legal battle with its employees to indicate that the company might have to pay out the
employees.
_________5. The accountant records income as soon as the salespeople report the delivery
of goods to the client.
_________6. The accountant finished the financial statement for the yar after the 12 month
fiscal period and begins with the new fiscal year.
_________7. The accountant receives the utility billing statements for June nd includes
them in the financial statements for the same month.
_________8. The accountant returns to the employees the receipts of the personal
transactions they made during working hours.
_________9. A typhoon hit the city and destroyed many establishments . Upon inventory
reported a loss of P50,0000. It has a net income of P15,000,000
________10. The accountant gathers all the official receipts , vouchers and invoices for a
particular period and records them objectively.
DISCUSSION
Generally Accepted Accounting principles (GAAP) - are principles , concepts or standards
serve as the ground rules that govern how accountants record, classify, summarize, interpret
and communicate financial information. Accounting experts have developed these principles;
over the years to set or define the accepted accounting practices consistent with the system of
financial reporting that will be able to adapt to a constantly changing business environment.
In the Philippines , the body that sets the accounting standards is the Financial Reporting
Standards council ( FRSC ) . It was established by the Board of Accountancy in 2006 by
virtue of the implementing rules and Regulations of RA 9298 the Philippine Accountancy Act
of 2004. FRSC issued the accounting standards referred to i the Philippines today as the
Generally Accepted Accounting Principles ( GAAP).
Basic Accounting Concepts
Assumption of Going concern –tells that the business will continue to operate at an indefinite
period of time,
Module in Accounting 1 – WEEK 4
Accounting entity concept –recognizes an economic or business entity as an individual
accounting entity and it is separated from its owners , managers and employees.
Monetary Unit concept –money is the unit of measurement used in accounting. Under this
concept, business activities that are financial in nature are recorded with corresponding
amounts expressed in the countyr’s currency in our case the Philippine [Link] is
quantifiable and is the generally recognized or accepted medium of exchange.
Time period or Periodicity concept-tells that the business entity’s indefinite time of existence
is divided into time periods or accounting periods with equal lengths . Usually, this time
period is 12 months long , which can be classified as calendar period or fiscal (or financial)
period .
Accrual Concept-the accrual basis of accounting tells that revenue or income is recognized
when it is earned regardless of when it is received and expense is recognized when it is
incurred regardless of when it is paid.
The following accounting principles are related to the accrual concept.
Revenue recognition principle –revenue is recognized when it earned regardless of
when it is received.
Expense recognition principle-requires accountants to record an expense when it is
already incurred whether or not payment has been made immediately.
Matching principle is established in recognition of the fact that there is a cause and
effect relationship between revenue and expense. Accountants must record properly all
the expenses incurred to generate revenues.
Materiality Concept-indicates that accountants should disregard accounting standards for
trivial matters or for those transactions that are not important to influence decisions. In
contrast, this concept also tells that all important matters must be recorded and disclosed.
Objectivity or Reliability concept- guides accountants in presenting information free from
biases as evidenced by documents.
Cost Concept-also known as the “historical cost convention”, tells that resources acquired
must be recorded in reference to the acquisition price and that there must be no adjustment in
value at a later period. Therefore, the value of assets is recorded at their original cost.e
Conservatism Concept-Accountants apply the conservatism concept when they choose the
worst case scenario for the company when it is faced with significant uncertainties abunt an
accounting problem.
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Module in Accounting 1 – WEEK 4
ACTIVITIES
Activity 1
You have learned the basic concepts or principles in accounting. Search on the internet other
accounting principles that ae related to the basic principles . Particularly, research on the
following:
1. Consistency Concept
2. Disclosure Concept
3. Dual effect Concept
4. Realization Concept
Activity 2
Access the Web and find out what accounting professionals use as a guiding principle in
considering which financial information is material or immaterial. Provide examples. Submit
your output in G classroom.
Activity 3
For further readings visit the following websites :
[Link]
[Link]
[Link]
FORMATIVE ASSESSMENT
Explain briefly each concept or principle of accounting in your own words. Please avoid copy
and paste mode.
1. Going Concern assumption
2. Accounting Entity concept
3. Monetary unit concept
4. Time period concept
5. Accrual concept
Please submit your output in our google classroom
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Module in Accounting 1 – WEEK 4
CLOSURE
In this module, you learned about the assumption of going concern and the concepts of
accounting entity, monetary unit, periodicity and accrual in accounting
Other important concepts or principles such as materiality, objectivity and reliability,
cost and conservatism concepts were also explained. Thess concepts serve as a guide in
accomplishing any accounting tasks .
ASSIGNMENT
References:
Danilo S. Camerino, “Diwa Senior High School Series Fundamentals of
Accountancy,Business and Management 1 by DIWA LEARNING SYSTEMS INC.
Florence Lao Ong , Fundamentals of Accountancy,Business and Management I by C
& E Publishing Inc.
POST-ASSESSMENT
Cite real life experience where you were able to apply the accounting concepts or principles
discussed in this module. How did these help you in managing your finances.
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Module in Accounting 1 – WEEK 4
PAMAGAT NG MODYUL – BILANG NG LINGGO
PAMAGAT NG ARALIN
Halimbawa:
MODYUL SAFILIPINO GRADE 7 – UNANG LINGGO
MAIKLING KUWENTO
LAYUNING NG ARALIN
Sa aralin na ito, inaasahang maipamamalas mo ang sumusunod na kaalaman, kakayahan, at
pag-unawa:
PAUNANG PAGTATAYA
PAGTALAKAY
MGA GAWAIN
PORMATIBONG PAGTATAYA
PAGLALAGOM / PAGTATAPOS NG ARALIN
TAKDANG ARALIN
PANAPOS NA PAGTATAYA
FORMAT:
FONT STYLE TIMES NEW ROMAN
FONT SIZE 12
MARGIN SIZE 1’ FOR ALL SIDES
SPACING SINGLE SPACING
PAPER SIZE 13 X 8.5 (Long Bond Paper Size)
NOTES:
PARTS OF THE MODULE MUST BE IN BOLD FORM, ALL CAPS AND CENTERED
CONTENT OF THE MODULE MUST BE IN Normal Form, (you may use BOLD or
ITALICIZED FORM to give emphasis for important terms), AND JUSTIFIED.
DO NOT FORGET TO CHANGE THE HEADER ACCORDING TO YOUR SUBJECT
AREAS.
PLEASE USE FILIPINO TRANSLATION FOR THE FILIPINO LANGUAGE SUBJECTS.
PLEASE DO NOT CHANGE ANY IN THE TITLE PAGE EXCEPT SUBJECT AREA AND
LEVEL, NAME OF TEACHER.
PLEASE BE AWARE OF THE PAGE NUMBER.
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Module in Accounting 1 – WEEK 4
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