Lesson 2 Flashcards
The business is viewed as a separate entity, distinct from its owner(s). Only the transactions of the business are recorded in the books of accountsThe personal transactions of the business owner(s) are not recorded.
Basic Accounting Concepts
Separate entity concept
assets are initially recorded at their acquisition cost.
Basic Accounting Concepts
Historical cost concept (Cost principle)
The business is **assumed to continue **to exist for an indefinite period of time.
Basic Accounting Concepts
Going concern assumption
Some costs are initially recognized as assets and charged as expenses only when the related revenue is recognized.
Basic Accounting Concepts
Matching
The life of the business is divided into series of reporting periods.
Basic Accounting Concepts
Reporting Period
Assets, liabilities, equity, income and expenses are stated in terms of a common unit of measure, which is the peso in the Philippines
Basic Accounting Concepts
Stable monetary unit
An item is considered material if its omission or misstatement could influence economic decisions.
Basic Accounting Concepts
Materiality concept
matter of professional judgment and is based on the size and nature of an item being judged.
Basic Accounting Concepts
Materiality
the costs of processing and communicating information should not exceed the benefits to be derived from the information’s use.
Basic Accounting Concepts
Cost-benefit
information communicated to users reflect a balance between detail and conciseness, keeping in mind the cost-benefit principle.
Basic Accounting Concepts
Full disclosure principle
like transactions are accounted for in like manner from period to period.
Basic Accounting Concepts
Consistency concept
The PFRSs are Standards and Interpretations adopted by the FRSC. They consist of the following:
- Philippine Financial Reporting Standards (PFRSs);
Philippine Accounting Standards (PASs); and
Interpretations
Fundamental Qualitative Characteristics
Qualitative Characteristics
i. Relevance (Predictive Value, Confirmatory Value, Materiality)
ii. Faithful Representation (Completeness, Neutrality,
Free from error)
Enhancing Qualitative Characteristics
Qualitative Characteristics
i. Comparability
ii. Verifiability
iii. Timeliness
iv. Understandability
are the characteristics that make information useful to users.
Fundamental vs. Enhancing
fundamental qualitative characteristics
