Course Code: ACC 102

Module #2

Name: _____________________________________ Class number: _________________

Section: _________ Schedule: _________________ Date: ________________________

Lesson title: Accounting Concepts and Principles Materials:

Lesson Objectives: Module #2

1. Define and be familiarized about basic accounting

concepts and assumptions.
2. Properly explain the basic principles of accounting. References:
3. To know the different fundamental principles of the
accountancy profession. Fundamentals of Financial
4. To know the accounting standard setting body and their Accounting and Reporting by
pronouncements both in the Philippines and Win Ballada
international.

Productivity Tip:
Stay organized and be thorough.
 Have a designated study space that is free of distractions so you can focus on your work.
 Prepare as if you have to teach the information you are studying. Organize information by
creating charts, outlines, study guides, flashcards, concept maps and chapter maps.
 Use smart test-taking strategies. Before a quiz or exam, write down formulas or other
information you may need.

A. LESSON PREVIEW/REVIEW
1) Introduction (2 mins)

Accounting practices follows certain guidelines. Generally Accepted Accounting Principles

(GAAP) encompasses the conventions, rules and procedures necessary to define accepted accounting
principles at a particular time. The general acceptance of an accounting principle usually depends on
how well it meets the three criteria: relevance, objectivity, and feasibility.

Relevance is the ability of the given information to provide a meaningful and useful result. Relevant
information must be useful, understandable, timely, and needed for decision making.

Objectivity is the extent that the resulting information is not influenced by the personal bias or
judgments of those who provides it. Objective information must be based on solid evidence and facts.

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Name: _____________________________________ Class number: _________________

Section: _________ Schedule: _________________ Date: ________________________

Feasibility is the ability that the principle can be implemented without undue complexity to cost.
Feasible principle is practical.

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 Course Code: ACC 102
Module #2

Name: _____________________________________ Class number: _________________

Section: _________ Schedule: _________________ Date: ________________________

2) Activity 1: What I Know Chart, part 1 (3 mins)

Try answering the questions below by writing your ideas under the What I Know column. You may use
key words or phrases that you think are related to the questions. Answer the What I learned section
after reading the Concept notes

What I Know Questions: What I Learned

What is going concern concept?

What is matching principle?

What are the duties and

responsibilities of Financial
Reporting Standards Council?

B. MAIN LESSON
1) Activity 2: Pre-Printed Content Notes (13 mins)

Several fundamental concepts underlie the accounting process. In recording business transactions, accountant
must consider the following:

Fundamental Accounting Concepts

1. Entity concept – each entity should be evaluated separately; it separates owners from
the business.

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 Course Code: ACC 102
Module #2

Name: _____________________________________ Class number: _________________

Section: _________ Schedule: _________________ Date: ________________________

2. Periodicity concept – divides the life of an entity into equal time periods, like month, quarter or
years; allows users to obtain timely data for a specific period to serve as a basis of decision
making
3. Stable monetary unit concept – treats peso amounts as though each peso has the same
purchasing power as any other peso at any time; effects of inflation are ignored
4. Going concern – financial statements are prepared on the assumption that the business will
continue to operate in the foreseeable future. It is assumed further that the enterprise has
neither the intention nor the need to liquidate its operations.

Fundamental Qualitative Characteristics of Financial Information

1. Relevance – Information must possess the following:
 Predictive value
 Confirmatory or feedback value

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Name: _____________________________________ Class number: _________________

Section: _________ Schedule: _________________ Date: ________________________

2. Faithful Representation - There is agreement between the description and the economic event
it purports to represent. To be a perfectly faithful representation, a depiction should have the
following characteristics:
 Completeness – all and only events that occurred in a specific period are
presented
 Neutrality - free from bias
 Freedom from error – the system that processed the information were tried and
tested

Enhancing Qualitative Characteristics

 Comparability - allows comparison of similar information with another entity or with another
period for the same entity
 Consistency – use of the same accounting practice from period to period.
 Verifiability - supported by documentary evidence.
 Timeliness - prompt enough to be useful in decision making
 Understandability - classify and present information clearly and concisely.
 Cost and Benefit Analysis of Financial Reporting – different sizes of entities and other
factors justify different reporting requirements in certain situations.

Basic Accounting Principles

1. Objectivity principle – accounting records and statements are based on reliable data
and supported by verifiable documentation.
2. Historical cost – acquired assets should be recorded at their actual cost and not at
what management thinks they are worth as at reporting date.
3. Revenue recognition principle – revenue is to be recognized in the accounting period
when goods are delivered or services are rendered or performed.
4. Expense recognition principle – expenses should be recognized in the accounting period
in which goods & services are used to produce revenue and not when entity pays for those
goods & services.
5. Adequate disclosure – requires that all relevant information that would affect the
user’s understanding and assessment of the accounting entity be disclosed in the financial
statements.
6. Materiality – dictates that financial reporting should only be concerned with information that
is significant to affect evaluations and decisions.
7. Consistency – dictates that firms should use the same accounting method from period to
period to achieve comparability over time within a single enterprise.
8. Matching Principle – the costs of doing business are recorded in the same period as the
revenue they help to generate.

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 Course Code: ACC 102
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Name: _____________________________________ Class number: _________________

Section: _________ Schedule: _________________ Date: ________________________

As you are aiming to become a Certified Public Accountant in the future, it is a must for you to know the
following fundamental principles that a professional accountant must observe.

Fundamental Principles of the Accounting Profession

 Integrity – being straightforward and honest.
 Objectivity – not allowing bias, conflict of interest, or undue influence to others to override
professional business judgements.
 Professional competence and due care – accountants has a continuing duty to maintain
professional knowledge and skill at level required.
 Confidentiality – respect of confidentiality of information acquired.
 Professional behaviour - accountants are required to comply with relevant laws and
regulations.

Accounting Standards are authoritative statements of how particular types of transaction and other events
should be reflected in financial statements

The main objective of the International Accounting Standards Board (IASB) is to develop a uniform set of
high quality, understandable and enforceable global accounting standards

Financial Reporting Standards Council (FRSC) was created to assist the Board of Accountancy (BOA) to
carry out its powers and functions provided under Republic Act No. 9298 or the Philippine Accountancy Act of
2004.

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 Course Code: ACC 102
Module #2

Name: _____________________________________ Class number: _________________

Section: _________ Schedule: _________________ Date: ________________________

Philippine Regulatory Agencies

 Bureau of Internal Revenue (BIR) - to ensure compliance of National Taxes (Income Taxes
and Business Taxes) and some license requirements of all businesses.
 Local Government Units (LGU) - to ensure payment of local business taxes and other local
taxes such as community tax, real property tax and professional tax.
 Security and Exchange Commission (SEC) - to regulate the operation of all kinds of
corporation (profit or nonprofit)
 Department of Budget and Management (DBM) - Undertakes the formulation of the annual
national budget in a way that ensures the appropriate prioritization and allocation of funds to
support the annual program of government
 Bangko Sentral ng Pilipinas (BSP) - to regulate the operations of all banks and business
import and export activities and other finance institutions.
 Philippine Institute of Certified Public Accountants (PICPA) - to protect the credibility of
CPA certificates and instill ideals of professionalism, ethics and competence among CPAs.

2) Activity 3: Skill-building Activities (with answer key) (18 mins + 2 mins checking)

Directions: Write TRUE if the statement is correct and FALSE if not.

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 Course Code: ACC 102
Module #2

Name: _____________________________________ Class number: _________________

Section: _________ Schedule: _________________ Date: ________________________

_____ 1. The main objective of faithful presentation is to achieve public trust and confidence in
the financial statements.
_____ 2. Accounting information has confirmatory value if it has the ability to forecast the
outcome of future events.
3. The two qualitative characteristics of accounting information are relevance and
completeness.
_____4. Financial information must be free from material error to faithfully embody the
representation contained therein.
_____5. To be complete, financial reports must contain all necessary information that would
influence an economic decision.
_____6. Understandability means that accounting information must comprehensible.
_____7. Verifiability enables the users to identify similarities and differences between two or
more sets economic circumstances.
_____8. The enhancing qualities of accounting information are understandability, faithful
representation, timeliness and comparability.
_____9. Free from error is an ingredient of relevance.
_____10. Timeliness means that the accounting information must be available on time when
needed if it is to influence decision.

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 Course Code: ACC 102
Module #2

Name: _____________________________________ Class number: _________________

Section: _________ Schedule: _________________ Date: ________________________

3) Activity 4: What I Know Chart, part 2 (2 mins)

Now, I really would like to discover What You Know NOW by referring to the third column of the
Chart contained in your Activity 1.

4) Activity 5: Check for Understanding (5 mins)

Directions: Match the regulatory agency in Column A with the specific functions in Column B. Put
your answer after all the questions.

Column A Column B
1. Bangko Sentral ng Pilipinas (BSP) a. To ensure compliance of National Taxes
(Income Taxes and Business Taxes) and
license requirements of all businesses.
2. Philippine Institute of Certified Public b. To ensure payment of local business taxes
Accountants (PICPA) and other local taxes such as community tax,
real property tax and professional tax.
3. Bureau of Internal Revenue (BIR) c. To keep an eye on the operation
4. Security and Exchange Commission d. To regulate the operations of all banks and
(SEC) business import and export activities.
5. Local Government Units (LGU) e. To protect the credibility of CPA certificates
and instil ideals of professionalism, ethics and
competence among CPAs.

A. LESSON WRAP-UP
1) Activity 6: Thinking about Learning (5 mins)
Congratulations for finishing this module! Shade the number of this module that you have finished.

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 Course Code: ACC 102
Module #2

Name: _____________________________________ Class number: _________________

Section: _________ Schedule: _________________ Date: ________________________

b) Think about your learning by filling up your “My Learning Tracker” below. Write your learning targets,
your scores, and learning experience for this session and deliberately plan for our next learning
session.

Date Learning Target/Topic Scores Action Plan

What module# did you

What were your What contributed to the quality of your
What’s the do? What were the
scores in the performance today? What will you do next session
date today? learning targets? What
activities? to maintain your performance or improve it?
activities did you do?

FAQs

1. What are the career opportunities for Certified Public Accountants?

- The professional accountant has various opportunities as they may also engage in any of the
following areas of responsibilities:
a. Public Practice – they offer professional services to the public, which includes auditing, taxation, and
management advisory services.
b. Commerce and Industry – accountants employed or providing financial accounting, including internal
audit and other related accounting services.
c. Government Services – accountants may be hired by the government agencies such as Congress of
the Philippines, Commission on Audit, Bureau of Internal Revenue and Department of Finance.
d. Education/Academe – area that guarantees continued development of the profession as they
provides services to universities and colleges as professors and instructors,

2. What is the scope of CPA Licensure Examination?

- The licensure examination for certified public accountants shall cover, but are not limited to following
subjects: Financial Accounting and Reporting, Taxation, Business Law and Regulations, Auditing,

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 Course Code: ACC 102
Module #2

Name: _____________________________________ Class number: _________________

Section: _________ Schedule: _________________ Date: ________________________

Advanced Financial Accounting and Reporting, and Management Advisory Services.

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 Course Code: ACC 102
Module #2

Name: _____________________________________ Class number: _________________

Section: _________ Schedule: _________________ Date: ________________________

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