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Accounting Assumption

Juan dela Cruz opened a pet shop called Petness First Petshop and deposited PHP500,000 into the business bank account. The business earned PHP50,000 but incurred PHP60,000 in expenses. Juan is unsure which of the following expense items should be included: salary of PHP20,000, rent of PHP10,000, utilities at home of PHP15,000, utilities at the store of PHP10,000, and insurance of PHP5,000. The document defines key accounting terms like GAAP, PAS, PFRS and FRSC and discusses accounting assumptions and principles.

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Margerie Fruelda
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209 views12 pages

Accounting Assumption

Juan dela Cruz opened a pet shop called Petness First Petshop and deposited PHP500,000 into the business bank account. The business earned PHP50,000 but incurred PHP60,000 in expenses. Juan is unsure which of the following expense items should be included: salary of PHP20,000, rent of PHP10,000, utilities at home of PHP15,000, utilities at the store of PHP10,000, and insurance of PHP5,000. The document defines key accounting terms like GAAP, PAS, PFRS and FRSC and discusses accounting assumptions and principles.

Uploaded by

Margerie Fruelda
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Create a concept map

of Accounting and
business forms
according to ownership
and activities
Petness First Petshop
Juan dela Cruz opened his pet shop business called
Petness First Petshop. He opened a bank account for his
business and deposited PHP500,000. The business earned
PHP50,000 but he had doubts with the recorded expense
of PHP60,000. He is not sure if he should include the ff.
items as expenses:

• Salary expense 20,000


• Rent expense 10,000
• Utilities expense (at home) 15,000
• Utilities expense (at the store) 10,000
• Insurance expense 5,000
• Withdrawals 10,000
TOTAL 60,000
 Read Introduction on p. 36 and
 Find the meaning of
GAAP and its function.
PAS
PFRS
FRSC
GAAP(Generally Accepted Accounting Principles
 isa widely accepted set of rules, concepts and
principles.
 governs the application of accounting procedures.
 Developed by the accounting professionals to
guide prepares of financial statements in
recording and reporting financial information
regarding a business enterprise.
PAS(Philippine Accounting Standards)
PFRS(Philippine Financial Reporting Standards)
 Accounting standards used in the Philippines
 Adopted
by Financial Reporting Standards
Committee.
Accounting Assumptions

 Give your prior knowledge about the word ASSUMPTION.


 From the root word ASSUME.
 Synonym of assume?
 Suppose
 Guess
 Presume
 Meaning of assumption?
 Something that you assume to be the case even without proof
 In accounting, basic assumption is very important.
1. Economic Entity Assumption
 assumes that all the business transactions are
separate from the business owner’s personal
transactions.
2. Accrual Basis Assumption
 Accrual-accumulation or increase of something.
 Assumed that revenue is recorded in the period it is
earned regardless of the time the cash is received or
collected.
3. Going Concern Assumption
 Assumes that a company will continue to exist long
enough to carry out its objectives and commitments
and will not liquidate in the foreseeable future.
4. Monetary Unit Assumption
 Assumes that only transactions that can be expressed
in terms of money are recorded.
5. Time-Period Assumption
 Requires a business to complete the whole
accounting process over a specific operating time
period. monthly, quarterly, or annually
BASIC ACCOUNTING PRINCIPLES

Are detailed accounting rules and


guidelines that entities must follow when
measuring, recording and reporting
financial data.
When applied, reliability, relevance and
consistency of financial information is enhanced
which results to better understanding and
decision-making of users.
1. Cost Principle
 What is cost?
 Refers to the amount spent(cash or equivalent) when an item was
originally obtained.

2. Full Disclosure Principle


3. Matching Principle
4. Revenue Recognition Principle
5. Materiality Principle
6. Conservatism or Prudence Principle
7. Objectivity Principle

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