ADAPTIVE TEACHING GUIDE

MET # 5

Lesson # 3

Accounting Concepts and Principles

 Prerequisite Content-knowledge: Basic understanding of business transactions,
financial statements, and the purpose of accounting in business operations.

 Prerequisite Skill: Basic mathematical skills, critical thinking, and ability to interpret
financial information
Prerequisites Assessment: (Describe the type and content of the Prerequisite Assessment and Use a separate sheet for
the copy of a full-blown assessment.)

 A short quiz consisting of multiple-choice questions to assess students’ understanding

of basic financial statements and the purpose of accounting.

1. What is the primary purpose of accounting?

a) To maximize profits
b) To record, classify, and summarize financial transactions
c) To avoid paying taxes
d) To increase sales
Answer: b
2. Which financial statement shows a company's financial position at a specific point in time?
a) Income Statement
b) Cash Flow Statement
c) Balance Sheet
d) Retained Earnings Statement
Answer: c
3. The accounting equation is:
a) Assets = Liabilities + Owner's Equity
b) Assets = Liabilities - Owner's Equity
c) Assets + Liabilities = Owner's Equity
d) Assets - Liabilities = Owner's Equity
Answer: a
4. Which of the following is not an asset?
a) Cash
b) Inventory
c) Accounts Payable
d) Equipment
Answer: c
5. What does GAAP stand for?
a) General Accounting and Auditing Principles
b) Generally Accepted Accounting Principles
c) Global Association of Accountancy Professionals
d) Generally Applied Accounting Practices
Answer: b
6. Which accounting principle states that a company should be viewed as a separate entity
from its owners?
a) Going Concern Principle
b) Materiality Principle
c) Business Entity Concept
d) Monetary Unit Assumption
Answer: c
7. The principle that requires companies to use the same accounting methods from year to
year is:
a) Consistency Principle
b) Matching Principle
c) Full Disclosure Principle
d) Conservatism Principle
Answer: a
8. What does the term "depreciation" refer to?
a) Decrease in the value of inventory
b) Allocation of the cost of an asset over its useful life
c) Increase in the value of an asset
d) Write-off of bad debts
Answer: b
9. Which financial statement shows the company's revenues and expenses for a specific
period?
a) Balance Sheet
b) Cash Flow Statement
c) Income Statement
d) Statement of Owner's Equity
Answer: c
10. The concept that financial information should be free from bias and error is known as:
a) Reliability
b) Relevance
c) Comparability
d) Materiality
Answer: a

Pre-lesson Remediation Activity: (Describe the activities and Use a separate sheet for the copy of a full-blown
assessment.)

1. For Students with an Insufficient Level of Prerequisite Content-knowledge and/or Skill(s):

 Provide a brief overview of basic accounting terms and concepts through a

short video

2. For Students with a Fairly Sufficient Level of Prerequisite Content-knowledge and/or Skill(s):

 Engage students in a group discussion to review key accounting concepts and

their importance in business decision-making.
Introduction: Must include the following parts:

1. Time Allotment: 1 week

2. the knowledge (RUA) the student is expected to gain from learning the topic/lesson

At the end of the lesson, the learners will be able to:

- Remember: Key accounting concepts and principles
- Understand: The importance and application of accounting principles in financial reporting
- Apply: Accounting principles to solve exercises and real-world scenarios

3. Context where the student is going to apply their learning (In what PAA/EFAA and personal
use?)

 Students will apply this knowledge in preparing and analyzing financial

statements, making business decisions, and understanding the financial
aspects of organizations in their future careers or personal financial
management.
4. Overview of the Lesson

 This lesson will cover the fundamental accounting concepts and principles,
including the business entity concept, going concern assumption, monetary
unit assumption, periodicity assumption, cost principle, revenue recognition
principle, matching principle, and full disclosure principle. Students will learn
about each principle and practice applying them to various accounting
scenarios.

Student’s Experiential Learning: (Note: Use the Flexible Learning Activity Identified for the topic/lesson relative to the
General Enabling Teaching Strategy. Number of chunking of topics will be
dependent on the teacher’s plan.)

Chunk 1: Basic Accounting Concepts

Formative question: What is the business entity concept, and why is it important in
accounting?

Learning activity:
1. Brief lecture on the business entity concept, monetary unit assumption, and going concern
assumption
 Business entity - a business enterprise is separate and distinct from its owner or
investor.
 Examples : If the owner has a barber shop, the cash of the barber
shop should be reported separately from personal cash.
 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.
  Going concern - business is expected to continue indefinitely.
 Example: When preparing financial statements, you should
assume that the entity will continue indefinitely.
 Monetary unit principle - amounts are stated into a single monetary unit
 Example : 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

2. Group activity: Students will be given scenarios and must determine which concept applies
and explain why

Chunk 2: Key Accounting Principles

Formative question: How does the matching principle relate to the accrual basis of
accounting?

Learning activity:
1. Interactive presentation on revenue recognition, matching principle, cost principle, and full
disclosure principle

 Cost principle - accounts should be recorded initially at cost.

 Example : 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.
 Accrual Accounting Principle - revenue should be recognized when earned
regardless of collection and expenses should be recognized when incurred
regardless of payment. On the other hand, the cash basis principle in which
revenue is recorded when collected and expenses should be recorded when
paid. Cash basis is not the generally accepted principle today.
 Example: 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.
 Matching principle - cost should be matched with the revenue generated.
Example: 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.
 Disclosure principle - all relevant and material information should be reported.
Example: The company should report all relevant information.
 Conservatism principle - also known as prudence. In case of doubt, assets and
income should not be overstated while liabilities and expenses should not be
understated.
 Example: In case of doubt, expenses should be recorded at a
 higher amount. Revenue should be recorded at a lower
amount

2. Pair work: Students solve short exercises applying these principles to various business
transactions

A. Concept check. Use the following multiple choice questions for practice. Ask the students
to answer the following multiple choice questions:
1. The accounting guideline that requires financial statement information to be supported by
independent, unbiased evidence other than someone's belief or opinion is the:
a. Business entity principle b. Monetary unit principle
c. Going-concern principle d. Cost principle e. Objectivity principle

2. The principle that requires every business to be accounted for separately and distinctly from
its owner or owners is known as the:
a. Objectivity principle b. Business entity principle
c. Going-concern principle d. Revenue recognition principle e. Cost principle

3. The rule that requires financial statements to reflect the assumption that the business will
continue operating instead of being closed or sold, unless evidence shows that it will not
continue, is the:
a. Going-concern principle b. Business entity principle
c. Objectivity principle d. Cost Principle e. Monetary unit principle

4. To include the personal assets and transactions of a business's owner in the records and
reports of the business would be in conflict with the:
a. Objectivity principle b. Realization principle
c. Business entity principle d. Going-concern principle e. Revenue recognition principle

5. The objectivity principle:

a. means that information is supported by independent, unbiased evidence
b. means that information can be based on what the preparer thinks is true
c. means that financial statements should contain information that is optimistic
d. means that a business may not re-organize revenue until cash is received

Indicate which principles are violated

1. The owner-manager bought a computer for personal use. The invoice was given
to the accountant who recorded it as an asset of the business.

2. The statement of financial position of a company included equipment purchased

from Japan for 350,000 yen. It was reported at that amount in the statement of
financial position while all the other assets were reported in Philippine pesos.

3. No financial statements were prepared by Michael Go for his business. He

explained that he will prepare the statements when he closes the business, which he
predicts to take place after 20 years.

4. Aside from owning a shoe store, Albert operates a canteen. The assets of the
canteen are reported in the statement of financial position of the shoe store.

5. Purchased a hammer at a cost of PHP500. This was recorded as an asset and

expense to decrease its value by PHP50 per year for 10 years.

6. A food company ordered a machine needed in the assembly line of its production
department. Upon order, the machine was immediately listed as one of its assets.

Answers : (1) Business entity (2) Monetary unit (3) Time period (4) Business entity (5)
Materiality (6) Objectivity

Synthesis

 Summarize the key accounting concepts and principles discussed, emphasizing their
role in ensuring that financial statements provide a true and fair view of a company's
financial position. Engage students in a discussion about the potential consequences of
not adhering to these principles in business.

RUA of a Student’s Learning:

- Remember: Students will list the main accounting concepts and principles covered in the
lesson.
- Understand: Students will explain how specific accounting principles affect financial
reporting and decision-making.
- Apply: Students will solve a set of exercises that require the application of multiple
accounting principles to various scenarios.

Post-lesson Remediation Activity: (Describe the activity and use a separate sheet for the copy of a full-blown activity.)

 For students needing additional support Provide guided exercises that break down
the application of individual accounting principles in simpler scenarios, with step-by-
step solutions.
 For students with a strong grasp of the content: Present more complex case studies
 or real-life examples where multiple accounting principles must be applied,
encouraging students to explain their reasoning and approach to solving these cases.

Prepared by:

Villaluz I. Abualas

Checked by:

Kenneth A. Esto MA, LPT

SHS Principal