Chapter 1 - The Generally Accepted Accounting Principles
Financial Reporting Standards Council
Aims to develop a single set of high quality, understandable and enforceable accounting standards that require high quality, transparent and comparable information in financial statements and other financial reporting to help participants in the various capital markets and other users of information in making economic decisions
Calendar year
Begins on January 1 and ends on December 31 of the same year
Fiscal year
Begins on any month (except january) and will end on the twelfth month of the following year. - Ex. July 1, 2009 to June 30, 2010
Quarterly basis
Financial statements may be prepared At the end of every three months
Semi-annual basis
Financial statements may be prepared Six months
Annually
Financial statements may be prepared on one year
Generally Accepted Accounting Principles
Defines what is accepted accounting practice they are like laws that must be followed in financial reporting
Generally Accepted Accounting Principles
Encompasses the conventions, rules, procedures, practice and standards followed in the accumulation, preparation and presentation of accounting data in the financial statements
Natural business year
Is a twelve month period that ends on any month when the business is at the lowest point or is experiencing slack season
Financial Reporting Standards Council
Is the accounting standard setting body created by the professional regulation commission (PRC) upon recommendation of the Board of Accountancy
Unit of measurement assumption
Recognizes the statements is a n effective means of aggregatibg and communicatibg accounting information - it is a standard practice to ignore changes in purchasing power of a peso
Time period assumption
Requires that the indefinite life of the business be divided into time periods or accountin perios for the purpose of the preparing financial reports on the performance and financial position of the business
Accrual basis
Requires the revenue or income should be recognized when earned regardless of when collection is received; and expense should be recognized when incurred regardless of when payment js made
Business Entity concept
The business entity is treated as separated and distinct from its owner/s and from other business units. - it is important because it limits the economic data in the accounting system to data related to the activities of the business
Monthly basis
The shortest accounting period. - Financial statements may be prepared monthly
Going concern/continuity assumption
This assumes that unless there is evidence to the contrary, the business entity will continue to operate for an indefinite period
Matching principle
This principle relates to the expense recognition principle which requires the costs and expenses incurred in generating the revenue should be properly matched against the related revenue in determining the net income or net loss for the period
Unit of measurement assumption
This specifies that accounting should measure and report the results of a business' economic activities in terms of a monetary unit such as the Philippine Peso
