Fundamentals of Accounting
Fundamentals of Accounting
Fundamentals of Accounting
UNDERLYING ASSUMPTIONS
Going Concern - financial statements are normally
prepared on the assumption that an enterprise is a
going concern and will continue in operation for the
foreseeable future.
FUNDAMENTAL CONCEPTS
OF ACCOUNTING PROCESS
Entity Concept – transactions of different entities
should not be accounted for together. Each entity
should be evaluated separately.
Periodicity Concept – an entity’s life can be
meaningfully subdivided into equal time periods
for reporting purposes.
Stable Monetary unit Concept – the Philippine
peso is a reasonable unit of measure and that its
purchasing power is relatively stable.
GAAP usually depends on how well
it meets THREE CRITERIA
to the extent that it results in information
that is meaningful and useful to those who
RELEVANCE need to know something about a certain
organization.
Or
LIABILITIES
ASSETS = EQUITIES
CAPITAL
RULES ON DEBITS AND CREDITS
THE DOUBLE-ENTRY SYSTEM
Assets
. .
Liabilities
. .
Owner’s Equity:
Owner’s Capital
. .
Withdrawals
. .
Income
. .
Expenses
. .
RULES ON DEBITS AND CREDITS
TYPES AND EFFECTS OF TRANSACTIONS
An asset account increases and
a corresponding claims Purchase of supplies on
1. SOURCE OF (liabilities or owner’s equity)
ASSETS (SA) account.
account increases Sold goods on cash