CHAPTER 1

 Entity Concept – an accounting entity is an organization or a section of an organization that

stands apart from other organization and individuals as a separate economic unit.
 Periodicity Concept – an entity’s life can be meaningfully subdivided into equal time periods for
reporting purposes.
 Stable Monetary Unit Concept (Unit of Measure) – The Philippine peso is a reasonable unit of
measure that its purchasing power is relatively stable.

 Relevance – has a meaningful and useful to those who need to know something about a certain
organization.
 Objectivity – not influenced by the personal bias or judgment of those who furnish it.
 Feasibility – can be implemented without undue complexity or cost.

 Objectivity Principle – free from bias ; fair

 Historical Cost – acquired assets should be recorded at their actual cost and not at what
management thinks they are worth as at reporting date.
 Revenue Recognition Principle – revenue is to be recognized in the accounting period when
goods are delivered or services are rendered or performed.
 Expense Recognition Principle – expenses should be recognized in the accounting period in
which goods and services are used up.
 Adequate Disclosure – requires all relevant information that would affect the user’s
understanding and assessment of the accounting entity be disclosed in the financial statements.
 Materiality – financial reporting is only concerned with information that is significant enoughs
 Consistency Principle – the firms should use the same accounting method from period to period
to achieve comparability over time within a single enterprise

 Intellectual – logical thinking & understand critical thinking,

 Interpersonal – ability to work in groups and being a team player.
 Communication – refers to active listening skills and the ability to communicate effectively one’s
point of view, both orally and in writing

 Professional Ethics – these include integrity, objectivity and independence, professional

competence and due care, confidentiality, and professional behavior.
 Moral Values – what is morally right

 Ethics – concerned with right and wrong and how conduct should be judged to be good or bad.
 Ethical Dilemma – is a situation in which there is no obvious right or wrong decision but rather a
right or right answer.
 Ethical reasoning – we follow this process when we are attempting to solve an ethical dilemma.
 Sleep-test ethics – is supposed to tell people whether or not they have made a morally sound
decision. A person who made a right choice can sleep sounly after making the decision.

 White collar crime – big sums of money are lost annually due to fraud, embezzlement, theft of
equipment and supplies, false insurance claims, bribery, kickbacks, and other schemes.
 Whistle-blowing – refers to going to the authorities or the media with proof that a company is
engaged in wrong-doing.
 Conflicts of interest – arise when a person must play two conflicting roles in a situation.
 Fiduciary responsibilities – the professional must put the clients’s interest ahead of his own
because the client has placed significant trust in him and his professional abilities.
 Sexual harassment – defined as unwanted repeated or agrresive sexual commentary or advances
of a sexual nature toward another person.
 Discrimination – based on race, religion, ethnicity, gender, age, marital status, or sexual
preference is to be avoided on both legal and ethical grounds.
  Integrity – should be straightforward and honest ; implies fair dealing and truthfulness.
 Objectivity – should not allow bias, conflict of interest or undue influence of others.
 Professional Competence and Due Care – attainment & maintenance
 Confidentiality – should respect the confidentiality of information and should not disclose any
such information to third parties without proper and specific authority unless there is a legal or
professional right or duty to disclose.
 Professional Behavior – a professional accountant should comply with relevant laws and
regulations and should avoid any action that discredits the profession.

 Auditing – an external audit is the independent examination that ensures the fairness and
reliability of the reports that management submits to users outside the business entity.
 Bookkeeping – is a mechanical task involving the collection of basic financial data.

CHAPTER 2

 Relevance – capable of making a difference in the decisions made by users.

 Confirmatory Value – when it is used to confirm or correct the decision-maker’s earlier
expectation.
 Predictive Value – when it used to make predictions of, for instance, future cash flows, or
income.
 Faithful Representation – completeness, neutrality, and freedom form error.
 Completeness – a complete depiction includes all information necessary for a user to understand
the phenomenon being depicted, including all necessary descriptions and explanations.
 Neutrality – free from bias.
 Freedom from error- no error or omissions in the description of the phenomenon.

 Comparability – compared with similar information about other entities and with similar
information about the same entity for another period or another date.
 Verifiability – assure users that information represents faithfully the economic phenomena it
purports to represent.
 Timeliness – information is available to decision-makers in time to be capable of influencing their
decisions.
 Understandability – comprehensive & intelligible ; classifying, characterizing and presenting
information clearly and concisely.

 Going Concern – assumed that the enterprise has neither the intention nor the need to liquidate or
curtail materiality the scale of its operations.

 Financial concept – capital is synonymous with the net assets or equity of the enterprise.
 Physical or Productive concept – capital is regarded as the productive capacity of the enterprise.

CHAPTER 3

 Asset – is a resource controlled by an enterpirse as a result of past events and from which future
economic benefits are expected to flow to the enterprise.
 Past events – The event must be past before an asset can arise.
 Future economic benefits – These are evidence by the prospective receipt of cash.

 Liability – present obligation of the enterprise arising from past events.

 Obligations – These may be legal or not.
 Transfer economic benefits – this could be a transfer of cash, or other property.
 Past transactions or events – refer to discussion in assets.
 Complementary nature of assets and liabilities – as should be evident from the above, assets and
liabilities are seen as mirror images of each other.

 Equity – is a residual interest in the assets of the enterprise after deducting all its liabilities.
 Income – increase of economic benefits.
 Revenue – arises in the course of the ordinary activities of an enterprise and is referred to by a
variety of different names including sales, fees, interst, dividends, royalties, and rent.
 Gains – represent other items that meet the definition of income and may, or may not, arise in the
course of the ordinary activites of an enterprise.
 Expenses – decreases in economic benefits.
 Losses – represent other items that meet the definition of expense and may, or may nor, arise in
the course of the ordinary activities of an enterprise.

 Account – basic summary device of accounting.

 Accounting Equation – the most basic tool of accounting.

Assets = Liabilities + Owner’s Equity