Fundamentals of

Accountancy, Business
and Management 1

EMMYLOYD C. BIERSO
Subject Teachers
Concept Map
 LET’S DO THIS!!!

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 following items as expenses:
 RULES OF
RULES OF LIFE
LIFE
What are
What are rules
rules for?
for?
What are rules at home? School?
Workplace?
Can you imagine our society
without law?
 ACCOUNTING
CONCEPTS AND
PRINCIPLES
 Generally Accepted Accounting
Principles
• these are broad, general statements or
rules and procedures that serve as guides
in the practice of accounting

• these are standards, assumptions, and

concepts with general acceptability
Generally Accepted Accounting Principles

as applied in the Philippines....

 Philippine Financial Reporting

Standards (PFRS)
 Philippine Accounting

Standards (PAS)
 ACCOUNTING PRINCIPLES

● a business
Business Entity
enterprise is
Principle separate and
distinct from its
owner or investor.
 BUSINESS ENTITY
BUSINESS ENTITY // ENTITY
ENTITY PRINCIPLES
PRINCIPLES

o If the owner has a barber shop, the cash of

the barber shop should be reported
separately from personal cash.

o The owner had a business meeting with a

prospective client. The expenses that come
with that meeting should be part of the
company’s expenses. If the owner paid for
gas for his personal use, it should not be
included as part of the company’s expenses.
 ACCOUNTING PRINCIPLES

Going Concern ●business is

Principle expected to
continue
indefinitely
 GOING CONCERN
GOING CONCERN PRINCIPLES
PRINCIPLES

o When preparing financial

statements, you should assume that
the entity will continue indefinitely.
 ACCOUNTING PRINCIPLES

Time Period
• financial
Principles/
statements are to
Periodicity
be divided into
specific time
intervals.
 Time Period
Time Period Principles/Periodicity
Principles/Periodicity

An accounting period may be classified as either

of the following:
a.Calendar year- a twelve- month period that
starts on January 1 and ends on December 31.
b.Fiscal Year- a twelve-month period that starts
on any month of the year other than January and
ends twelve months after the starting period
Example : a business whose fiscal year starts May
1, 2016 ends its fiscal year on April 30,2017.
 ACCOUNTING PRINCIPLES

Monetary Unit • amounts are

Principle stated into a
single monetary
unit
 Monetary Unit
Monetary Unit Principles
Principles

o Jollibee should report financial

statements in pesos even if they have a
store in the United States.

o IHOP should report financial

statements in dollars even if they have
a branch here in the Philippines.
 ACCOUNTING PRINCIPLES

financial
Objectivity
statements must
Principle
be presented with
supporting
evidence.
 Objectivity Principles
Objectivity Principles

o When the customer paid

Jollibee for their order, Jollibee
should have a copy of the receipt
to represent as evidence.
o When a company incurred a
transportation expense, a
voucher should be prepared as
 ACCOUNTING PRINCIPLES

Cost/
HistoricalPrinci
accounts should be
ple
recorded initially
at cost.
 Cost/ Historical
Cost/ Historical Principles
Principles

o When Jollibee buys a cash

register, it should record the cash
register at its price when they
bought it.
o When a company purchases a
laptop, it should be recorded at the
price it was purchased.
 ACCOUNTING PRINCIPLES

revenue should be
Accrual
recognized when
Accounting earned regardless of
Principle collection and
expenses should be
recognized when
incurred regardless of
payment.
 Accrual Principles
Accrual Principles

o When a barber finishes performing his

services, he should record it as revenue.
When the barber shop receives an electricity
bill, it should record it as an expense even if it
is unpaid.
 ACCOUNTING PRINCIPLES

Matching
cost should be
Principle
matched with the
revenue generated.
 Matching Principles
Matching Principles

 When you provide tutorial

services to a customer and there
is a transportation cost incurred
related to the tutorial services, it
should be recorded as an expense
for that period.
 ACCOUNTING PRINCIPLES

Disclosure
● all relevant and
Principle
material information
should be reported.
 ACCOUNTING PRINCIPLES

● also known as
prudence. In case of
Conservatism doubt, assets and
Principle income should not be
overstated while
liabilities and expenses
should not be
understated.
 Conservatism Principles
Conservatism Principles

In case of doubt, expenses

should be recorded at a higher
amount. Revenue should be
recorded at a lower amount
 ACCOUNTING PRINCIPLES

● in case of assets that

Materiality are immaterial to make
Principle a difference in the
financial statements,
the company should
instead record it as an
expense.
 Materiality Principles
Materiality Principles

In case of doubt, expenses

should be recorded at a higher
amount. Revenue should be
recorded at a lower amount
Practice Exercise
1. This
1. This refers
refers to to the
the relative
relative importance
importance ofof an
an
item or
item or event.
event. An An item
item isis considered
considered
significant ifif knowledge
significant knowledge of of it
it would
would influence
influence
prudent users
prudent users of of the
the financial
financial statements.
statements.
Materiality
2. Expenses
2. Expenses should
should be
be recognized
recognized at
at the
the
time they
time they are
are incurred
incurred such
such as
as when
when goods
goods
and services
and services are
are actually
actually used
used and
and not
not at
at the
the
time when
time when the
the entity
entity pays
pays for
for those
those goods
goods
and services.
and services.
Accrual Principles
3. This
3. This states
states that
that all
all material
material facts
facts that
that will
will
significantly affect
significantly affect the
the financial
financial statements
statements
must be
must be indicated.
indicated.

Adequate disclosure
4. All
4. All properties
properties and
and services
services acquired
acquired byby the
the
business must
business must be
be recorded
recorded at
at their
their original
original
acquisition cost.
acquisition cost.

Historical Cost
5. The
5. The business
business enterprise
enterprise is
is separate
separate and
and
distinct from
distinct from its
its owners
owners and
and from
from other
other
business enterprises.
business enterprises.

Entity Concept
6. All
6. All business
business transactions
transactions that
that will
will be
be
entered in
entered in the
the accounting
accounting records
records must
must be
be
duly supported
duly supported by
by verifiable
verifiable evidence.
evidence.

Objectivity
7. Income
7. Income should
should be
be recognized
recognized at
at the
the time
time it
it
is earned
is earned such
such as
as when
when goods
goods are
are delivered
delivered
or when
or when services
services have
have been
been rendered.
rendered.

Accrual Principle
 8. Accounting
8. Accounting information
information about
about the
the
economic activities
economic activities of
of an
an enterprise
enterprise is
is
provided for
provided for specified
specified time
time periods.
periods.

Periodicity
 9. This
9. This refers
refers to
to the
the assumption
assumption that
that the
the
business enterprise
business enterprise will
will continue
continue to
to operate
operate
indefinitely.
indefinitely.

Going Concern
 10. Items
10. Items of
of insignificant
insignificant amount
amount
such as
such as paper
paper clips
clips can
can be
be charged
charged
outright to
outright to expenses.
expenses.
Materiality
Enrich
ment
 Indicate which
principles are violated
1. The
1. The owner-manager
owner-manager
bought aa computer
bought computer for for
personal use.
personal use. The
The invoice
invoice
was given
was given to
to the
the accountant
accountant
who recorded
who recorded it
it as
as an
an asset
asset
of the
of the business.
business.
Entity Principle
 2. The
2. The statement
statement ofof financial
financial position
position
of aa company
of company included
included an an equipment
equipment
purchased from
purchased from Japan
Japan for for 350,000
350,000
yen. It
yen. It was
was reported
reported at at that
that amount
amount
in the
in the statement
statement of of financial
financial position
position
while all
while all the
the other
other assets
assets were
were
reported in
reported in Philippine
Philippine pesos.
pesos.

Monetary Unit Principle

3. No
3. No financial
financial statements
statements were
were
prepared by
prepared by Michael
Michael Go
Go for
for his
his
business. He
business. He explained
explained that
that he
he
will prepare
will prepare the
the statements
statements when
when
he closes
he closes the
the business,
business, which
which he
he
predicts to
predicts to take
take place
place after
after 20
20
years.
years.
Going Concern
4. Aside
4. Aside from
from owning
owning aa shoe
shoe
store, Albert
store, Albert operates
operates aa canteen.
canteen.
The assets
The assets ofof the
the canteen
canteen are
are
reported in
reported in the
the statement
statement ofof
financial position
financial position ofof the
the shoe
shoe
store.
store.
Entity Principle
5. A
5. A food
food company
company ordered
ordered aa
machine needed
machine needed in in the
the assembly
assembly
line of
line of its
its production
production department.
department.
Upon order,
Upon order, thethe machine
machine was was
immediately listed
immediately listed as
as one
one of
of its
its
assets.
assets.
Accrual Principle
EVALUATION
MATCHING TYPE
Write the letter of the correct answer
1. All relevant
information
should be
included in the
financial
reports
MATCHING TYPE
Write the letter of the correct answer
2. In case of
doubt, assets
and income
should not be
overstated.
MATCHING TYPE
Write the letter of the correct answer
3. Assume that
the company
will continue
indefinitely.
MATCHING TYPE
Write the letter of the correct answer
4. All
transactions
should be
supported by
unbiased
evidence.
MATCHING TYPE
Write the letter of the correct answer
5. Expenses
should be
recorded in
the period
when the
revenue is
generated.
MATCHING TYPE
Write the letter of the correct answer
6. Minimal
costs incurred
should be
recorded as an
expense.
MATCHING TYPE
Write the letter of the correct answer
7. A Philippine
company
should report
financial
statements in
pesos.
MATCHING TYPE
Write the letter of the correct answer
8. A barber
who performs
services for a
client should
record
revenue.
MATCHING TYPE
Write the letter of the correct answer
9. Statement
of Financial
position
should be
recorded as of
December 31,
2015.
MATCHING TYPE
Write the letter of the correct answer
10. A company
that purchases
furniture
should record
it at its
acquisition
price.
 We are
We are what
what we
we repeatedly
repeatedly do.
do.
Excellence ,, therefore
Excellence therefore is
is not
not an
an act
act but
but
a habit.
a habit.

-- Aristotle
Aristotle