➴ Week 1 ➢ Agents of the owners. They are in
charge of the day-to-day activities.
Basic Accounting Assumptions
❖ Customers
➢ Purchasers / the economic drivers
Accounting assumptions ❖ Suppliers
- are like building blocks for creating rules and ➢ Responsible for providing products or
methods for accounting. services necessary for operation and
sustenance.
❖ Economic Entity ❖ Lenders
- The activities of the entity are to be kept ➢ Provide alternative capital sources
separate from the activities of its owner and ❖ Potential Investors
all other economic entities. ➢ Uses information accounting to
❖ Going Concern determine the relative merits of various
- Assumes that the business will keep investment opportunities.
running for the foreseeable future, long ❖ Government and Regulatory Bodies
enough to fulfill its objectives, plans, ➢ Uses financial statements for compiling
contracts, and commitments unless there’s statistics which in turn help in compiling
liquidation. national accounts. Also uses reports for
❖ Monetary Unit tax assessment and for evaluation of
- Assumes that money is the standard in operating under regulatory framework.
measuring economic activity.
❖ Periodicity Accounts
- The life of a business is divided into separate ❖ Assets
periods: calendar year, which ends in ➢ Resources or things of value owned,
December, and fiscal year, which can vary. expected future economic benefits to
❖ Accrual Basis flow.
- Revenue should be recorded when earned ➢ Current Assets
regardless of collection, and expenses ○ Cash
should be recognized when incurred - Medium of exchange.
regardless of payment. - Currency, coins, checks,
money order, bank drafts,
demand deposit accounts.
Basic Accounting Equation ○ Accounts Receivable
- Amounts collectible on
Accounting equations open accounts of the
- The recording of business transactions is based customers.
on this. For every time you add something ○ Notes Receivable
(debit), you also have to take away something - A promissory note from
(credit). debtors/customers.
- An accounting formula expression the equality of ○ Interest Receivable
assets and equity (liabilities and capital) - Interest earned on note
receivable but not yet
★ Assets = Liabilities + Owner’s Equity received in cash.
○ Inventory
(Capital + Revenue - Expenses = OE)
- Tangible property held for
sale or used to produce
goods or services.
➴ Week 2 ○ Prepaid Expenses
Users of Accounting Information - Expenses paid in advance.
➢ Noncurrent Assets
Accounting information ○ Land
- To directly correlate the decision-making - Site owned used in
requirements of the users. operation.
○ Building
Users - Structure owned used in
❖ Owners operation.
➢ Investors or the titleholders ○ Furniture and Fixture
➢ Ex. sole traders, single-owned entities, - Long-lived items such as
partnerships, shareholders, other forms furnishings.
of corporate bodies ○ Equipment
❖ Managers - Machinery used.
charge of the day-to-day activities.
Basic Accounting Assumptions
❖ Customers
➢ Purchasers / the economic drivers
Accounting assumptions ❖ Suppliers
- are like building blocks for creating rules and ➢ Responsible for providing products or
methods for accounting. services necessary for operation and
sustenance.
❖ Economic Entity ❖ Lenders
- The activities of the entity are to be kept ➢ Provide alternative capital sources
separate from the activities of its owner and ❖ Potential Investors
all other economic entities. ➢ Uses information accounting to
❖ Going Concern determine the relative merits of various
- Assumes that the business will keep investment opportunities.
running for the foreseeable future, long ❖ Government and Regulatory Bodies
enough to fulfill its objectives, plans, ➢ Uses financial statements for compiling
contracts, and commitments unless there’s statistics which in turn help in compiling
liquidation. national accounts. Also uses reports for
❖ Monetary Unit tax assessment and for evaluation of
- Assumes that money is the standard in operating under regulatory framework.
measuring economic activity.
❖ Periodicity Accounts
- The life of a business is divided into separate ❖ Assets
periods: calendar year, which ends in ➢ Resources or things of value owned,
December, and fiscal year, which can vary. expected future economic benefits to
❖ Accrual Basis flow.
- Revenue should be recorded when earned ➢ Current Assets
regardless of collection, and expenses ○ Cash
should be recognized when incurred - Medium of exchange.
regardless of payment. - Currency, coins, checks,
money order, bank drafts,
demand deposit accounts.
Basic Accounting Equation ○ Accounts Receivable
- Amounts collectible on
Accounting equations open accounts of the
- The recording of business transactions is based customers.
on this. For every time you add something ○ Notes Receivable
(debit), you also have to take away something - A promissory note from
(credit). debtors/customers.
- An accounting formula expression the equality of ○ Interest Receivable
assets and equity (liabilities and capital) - Interest earned on note
receivable but not yet
★ Assets = Liabilities + Owner’s Equity received in cash.
○ Inventory
(Capital + Revenue - Expenses = OE)
- Tangible property held for
sale or used to produce
goods or services.
➴ Week 2 ○ Prepaid Expenses
Users of Accounting Information - Expenses paid in advance.
➢ Noncurrent Assets
Accounting information ○ Land
- To directly correlate the decision-making - Site owned used in
requirements of the users. operation.
○ Building
Users - Structure owned used in
❖ Owners operation.
➢ Investors or the titleholders ○ Furniture and Fixture
➢ Ex. sole traders, single-owned entities, - Long-lived items such as
partnerships, shareholders, other forms furnishings.
of corporate bodies ○ Equipment
❖ Managers - Machinery used.
