Scribd
Upload
38 views

Basic Principles of Accounting Presentation

The document provides an overview of basic accounting principles and concepts including the accounting equation, revenue recognition, matching, cost, full disclosure, objectivity, consistency, conservatism, economic entity, and going concern principles. It also discusses core accounting concepts like accrual basis accounting, cash basis accounting, double-entry accounting, and key financial statements.

Uploaded by

Iffat Nowshin
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
38 views

Basic Principles of Accounting Presentation

The document provides an overview of basic accounting principles and concepts including the accounting equation, revenue recognition, matching, cost, full disclosure, objectivity, consistency, conservatism, economic entity, and going concern principles. It also discusses core accounting concepts like accrual basis accounting, cash basis accounting, double-entry accounting, and key financial statements.

Uploaded by

Iffat Nowshin
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 17

Basic

Principles of
Accounting
Discussion of the Fundamental
Accounting Principles and Concepts
Introduction To Our Team Members

• Name: Moriom Afrin Soya Name: Jannaty Islam


Id:222-35-1219
• Id:221-35-850
Name: Erin Jahan Tufa
• Name: Nirob Hossain Id:221-35-834

• ID: 221-35-844

• Name: Md. Arifur Rahman

• Id: 221-35-822
What is Accounting?

The systematic recording, reporting, and analysis of financial transactions.


Importance: Helps in decision-making, tracking financial performance,
and legal compliance.
 The Accounting Equation

Equation: Assets = Liabilities + Equity


 Example:

Scenario: A company has $100,000 in assets and $40,000 in liabilities.


Calculation: Equity = $100,000 - $40,000 = $60,000
Fundamental Principles of Accounting

• Revenue Recognition
• Matching
• Cost
• Full Disclosure
• Objectivity
• Consistency
• Conservatism
• Economic Entity
• Going Concern
Revenue Recognition Principle

Revenue is recognized when it is earned, regardless of


when payment is received

Revenue recognition is a
generally accepted accounting principle (GAAP) that
identifies the specific conditions in which revenue is
recognized and determines how to account for it. Revenue is
typically recognized when a critical event has occurred, when
a product or service has been delivered to a customer, and
the dollar amount is easily measurable to the company.
 Example:
• Scenario: A company delivers goods in December but
receives payment in January.
• Action: Revenue is recorded in December.
Matching Principle

Expenses should be matched with the revenues they help to generate.


Matching principle is an accounting principle for recording revenues and expenses. It
requires that a business records expenses alongside revenues earned. Ideally, they both fall
within the same period of time for the clearest tracking. This principle recognizes that
businesses must incur expenses to earn revenues.

 Example:
• Scenario: A company incurs advertising costs in November that
result in sales in December.
• Action: Expense is recorded in December.
Cost Principle

Assets are recorded at their original cost.

When a business acquires an asset, the value of that


asset is recorded in the business's financial reports.
This initial value is called the cost principle, and it is an
important aspect of financial reporting for many
companies. Often, the cost principle is used to keep a
record of a company's tangible assets, without
reflecting the market value.

 Example:
• Scenario: A company buys a piece of equipment for
$50,000.
• Action: It is recorded at $50,000, even if market value
changes.
Full Disclosure Principle

All information that affects the full understanding


of a company's financial statements must be
included.

The full disclosure principle: This principle states that companies should
disclose all information that is relevant to their financial statements.
This includes information about their assets, liabilities, revenues, and
expenses

 Example:
• Scenario: Litigation that could impact financial health.
• Action: Notes to financial statements explain the litigation.
Objectivity Principle

Financial information should be based on objective evidence.

The Objectivity Principle in accounting states that financial statements


should be objective, i.e., the accounting information should be unbiased and
free from any external or internal influence. This helps financial statements
to be trustworthy and useful for evaluation.J

 Example:
• Scenario: A purchase is made.
• Action: Record based on receipt or invoice, not estimate.
Consistency Principle

The same accounting methods should be used


from period to period.
The consistency principle states that once a business chooses one
accounting method, this method should be used consistently going
forward. For example, if you use the cash basis of accounting this
should be applied to your cash flow statement, balance sheet, and
income statement.

 Example:
• Scenario: A company uses the FIFO inventory method.
• Action: Continue using FIFO unless a change is justified.
Conservatism Principle

When in doubt, choose the solution that will be least likely to overstate assets and
income.
The Conservatism Principle states that gains should be recorded only if their
occurrence is certain, but all potential losses, even those with a remote chance of
incurrence, are to be recognized.

 Example:
• Scenario: Uncertain inventory value.
• Action: Record the lower estimated value.
Economic Entity Principle

Business transactions are separate from the


personal transactions of the owners.
The economic entity principle is an accounting principle that
states that a business entity's finances should be keep
separate from those of the owner, partners, shareholders, or
related businesses. Debitoor accounting and invoicing
software makes it easy to keep track of your company
accounts and finances.
 Example:
• Scenario: Owner’s personal expenses.
• Action: Should not be recorded as business
expenses.
Going Concern Principle

Assumes that a business will continue to operate


indefinitely.

The going concern principle is the assumption that a business


will continue to exist in the near future, in other words, that it
will not liquidate or be forced out of business.

 Example:
• Scenario: Company is operating.
• Action: Assets valued based on non-liquidation
assumption.
Core Concepts in Accounting

 Accrual Basis Accounting:


• Definition: Recognizes revenue and expenses when they are incurred, not when
cash is exchanged.
• Example: Record sales when made, not when payment is received.

 Cash Basis Accounting:


• Definition: Recognizes revenue and expenses only when cash is exchanged.
• Example: Record sales only when payment is received.
 Double-Entry Accounting:
• Definition: Every transaction affects at least two
accounts.
• Example: A sale increases both the sales revenue
and cash accounts.
Financial Statements

 Key Statements:
• Balance Sheet: Shows assets, liabilities, and equity at a specific point in time.
• Income Statement: Shows revenues and expenses over a period, resulting in net
income or loss.
• Cash Flow Statement: Shows cash inflows and outflows over a period.
Thank You
Any Questions??

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy