GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

• Assets = Liabilities + Owner's Equity
• Accounting principles are rules that guide accountants in preparing financial reports.
• ENTITY CONCEPT - Business & Owner are two separate entities & therefore, should be considered separate from each other.
• GOING CONCERN - As if the business will live forever without thinking if it may fail.
• PERIODICITY CONCEPT - The purpose is to label a company's complicated activities into yearly, quarterly, & monthly -- to know if the business is doing well or not.
• MATCHING - Revenue & Expenses are matched on the income statement for a period of time. (e.g., yearly, quarterly, & monthly)
• ACCRUAL PRINCIPLE

  • INCOME is earned when the service is RENDERED (binigay), regardless of when cash is collected.
  • EXPENSE is incurred (recorded) when the service is RECEIVED, regardless of when the cash is paid.