1. Basic Accounting Principles

2. Why does it need principle?
Measurement of performance
Based on an unique platform
 Formation of the rules of games

3. Impact to the Finance Department
Has to follow the rules of games in
recording transactions and reporting
For statutory reporting
For banking relationships
For gaining credit from suppliers
Thus internally, needs the collaboration
from other departments

4. The rules of game - restrictions
Law (法, 实施细则,暂行条例)
Listing rules (上市条例)
Accounting standards (会计准则)
 GAAP(Generally Accepted Accounting Principle)
 IAS (International Accounting Standards)
 IFRS (International Financial Reporting Standards)
Accounting principles (会计原则)
Accounting policies (会计政策)
Accounting concept (会计概念)

5. Accounting concept
 entity concept (企业个体概念 )
 quantifiable concept (数量表达概念 )
 stable monetary measures concept (货币稳定概念)
 historical cost concept ( )
 going concern principle ( )
 consistency principle ( )
 prudence concept ( )
 realisation concept ( )
 matching concept ( )
 accrual concept ( )
 materiality concept ( )

6. Major Accounting Concepts
Business entity (企业个体 )
Going concern ( )
Consistency ( )
Matching ( )
Accrual ( )
Prudence ( )
Revenue recognition ( )

7. Business entity concept
Company is just an individual “legal
person”
Separate the pocket of the owner and
the business
For the business itself:
asset = liabilities + capital

8. Revenue recognition
Customer expressed the intention to
Take possession
At a fixed price
Delivery has occurred
Transfer of ownership and risk
Services have been rendered
Time of payment is irrelevant

9. Matching: revenue and cost
Record in the same period
Sales of the month
Cost for the sales
Expenses for the period
Provision
What is the cost and expense
o Goods/Service received?
o Invoice received?
o Cash paid out?
What is the sales
o Money from customer?
o Sales tax considered?

10. Record as costs or expenses
 Paid – money paid
 Payable – invoice received, not pay
 Accrual – invoice not receive
 Provision – risk of payment for
event happened

11. Accrual and Provisions
Who has the appropriate information
Goods/Services received but not invoiced
Risks of being charged in future
•Finance ?
•You ?

12. Collaboration
Help Finance in recording appropriate
costs and expenses
Help yourself in measuring your
performance
Because everyone looks at the financial
information only