FABM1

• Principles of Accounting


  • Objectivity
  • Business/economic entity
  • Going-concern
  • Cost
  • Time period
  • Duality concept
  • Accrual accounting
  • Matching
  • Materiality
  • Conservatism
• Objectivity


  Transaction recorded should have supporting documents
• Business/economic entity


  Requires every business to be accounted for separately and distinctly from its owner
• Going-concern


  Business will continue indefinitely
• Cost


  Require that all goods and services purchased recorded at cost
• Time period


  Business should report the financial statement as of Dec 31
• Duality concept


  Foundation of double entry bookkeeping system
• Accrual accounting


  Revenue and expenses should be reported in the period they are earned and incurred regardless if cash is received or not
• Matching


  Cost should be matched with the revenue generated
• Materiality


  In case of assets that are immaterial to make a difference in the financial statements, the company should instead record it as an expense
• Conservatism


  Also known as prudence principle
• January – December 1


  Calendar year
• Fiscal year – January 1- December 31
• Accounting Equation


  Assets = Liabilities + Owner's Equity