Exam (elaborations)
FABM 1, Chapter 6 (Accounting Principles)
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FABM 1, Chapter 6 (Accounting Principles)
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UFABM 1, Chapter 6 (AccountingPrinciples)
Business entity principle - 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 principle - business is expected to continue indefinitely. (Accounting lang may FOREVER).
Example: When preparing financial statements, you should assume that the entity will continue
indefinitely
Time period principle - financial statements are to be divided into specific time intervals. (Ung ngayon,
ngayon!
Ung dati, nakalipas na yun. Wag mo na balikan Babes!)
Example:
Philippine companies are required to report financial statements annually. (January 1 - December 31)
It may also be required to report in a monthly, quarterly, or semi-annually.
The salary expenses from January to December 2015 should only be reported in 2015.
Monetary unit principle - amounts are stated into a single monetary unit. (Pesos lang ditto sa PINAS)
Example:
Jollibee should report financial statements in pesos even if they have a store in the United States.
IHOP should report financial statements in dollars even if they have a branch here in the Philippines
because it's
a USA company.
Objectivity principle - financial statements must be presented with supporting evidence. (Hindi pwedeng
bintang ka lang ng bintang, dapat may proweba ka.)
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