Lesson 2: Generally Accepted Accounting Principles

Question 1

• Governs financial transaction

Answer 1

Generally Accepted Accounting Principles

Question 2

It is ideal for the persons doing business in the Philippines to have an accounting…?

Answer 2

Manual/Process Flow/Documentation/Recording guidelines

Question 3

• “Entity” - person
• The business is considered as person, separate and distinct from the owner/s.
• Transaction of the owner is separate from the business

Answer 3

Economic Entity Assumption

Question 4

• Assumption that a business will continue to exist in the near future, in other words, that it will not liquidate or be forced out of business.

Answer 4

Going Concern Principle

Question 5

• States that a business should report their financial statements appropriate to a specific time period.
• Monthly; Semi-annually; Annually

Answer 5

Time Period Assumption

Question 6

• Financial statement should be recorded according to the currency/monetary unit where the business resides and where the business submits its financial reports.

Answer 6

Monetary Unit Assumption

Question 7

• States that revenue should be recognized and recorded when the sale has been made or earned.

Answer 7

Revenue Recognition Principle

Question 8

• Directs a company to report an expense on its income statement in the period in which the related revenues are earned.

Answer 8

Matching Principle

Question 9

• Consistent use of the principle

Answer 9

Consistency Principle