7/30/2019 Accounting Concepts, Principles & Basis

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Accounting

CONCEPTS,PRINCIPLE

S & BASIS

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A. Entity Concept

An organization stands apart from otherorganizations as a separate economic

unit

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Going Concern Concept

Entity will continue to operate longenough to recover cost of its assets

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Reliability Principle

Accounting records must be based onthe most reliable (verifiable by an

independent observer) data available

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Revenue Principle

1. Establishes when to record revenue,usually when earned

2. Revenue is earned when the businesshas completed rendering services to thecustomer

3. Amount to record is equal to cashvalue of services or goods

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Matching Principle

Expenses matched against revenuesin same accounting period

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The Accounting Period

1. Usually one year ending December 31

2. Fiscal year ends on any other date ofthe year

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Cash Basis Accounting Impact of events not recognized until

cash is paid or received

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Accrual BasisAccounting1. Impact of events recognized as they

occur

2. Transactions are recorded even whencash not received or paid

3. Required by GAAP

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Stable Monetary Unit Basis for ignoring inflation