Principles of Accounting
ACCOUNTING RULES AND REGULATION
Please do the following assignments.
1. What do you learn from the session. Summarize them using your own word.
I learned a lesson about identify conventional accounting rules and are introduced to
accounting requirements along with additional semi-legal requirements determined by
the Financial Reporting Board and the International Accounting Standards Board. We
are taught the basics of what accountants do, why they do it, and what which is
required by law for them to do.
2. Do the following exercises based on the book:
a. From (Dyson & Franklin, 2017):
Check your learning no. 2, 4, and 11, page: 42
2.) Identify three categories of accounting rules
There are four important boundary rules: entity, periodicity or period
of account, going concern and monetary quantities.
Measurement rules determine how data should be recorded. There are
six important ones. They are:
Dual aspect and
Ethical rules relate to the moral code or principles expected to be
adopted in the preparation of accounts. There are four main ethical
rules: they are
4.) What is a going concern?
Going concern is a condition in which the company as a business entity, it
can operate in a future period is affected by financial and non-financial
circumstances and will not be liquidated in the short term.
11.) What is an accounting standard?
Is the statements of standard accounting practice issued by such body as
may be prescribed by regulations. (cA 2006, s464(1)). Accounting
standards are method and format for presenting information on the
financial statements of business activity. Accounting standards are
prepared, compiled, and approved by an official institution. This standard
explains what transactions should be recorded; how to record it and how to
News story quiz, No. 1 and 2 page: 42
1.) What are the advantages and disadvantages of a rules-based and a principles-
based approach to regulation and in turn, accounting matters?
Accountants can obtain detailed implementation instructions thereby
reducing uncertainty and mechanically resulting in the application of
specific rules in the standard.
Detailed rule based has several benefits. Schipper (2003) identifies its
benefits as follows,
(1) improve comparability,
(2) increase verifiability (consensus among gauges),
(3) reduce the possibility of disputes regarding an accounting
(4) reduce the risk of litigation
The main problems with this approach are that:
(1) it is difficult to formulate rules that accommodate every eventuality
(2) ways will always be found of getting round whatever rules are
Principle based standards are selected principles that are easy to
The relationship between one principle and another will become
Consistency between principles and between individual standards will
be more assured
Principle contradictions are easier for the standard setters to detect and
The accountant will make a number of estimates that he must be
responsible for and require more professional judgment (Schipper,
2.) Why is a principles-based approach to regulation necessary particularly in
times of economic turmoil?
This approach allows for individual circumstances to be taken into account
but it can result in apparent inconsistencies in the accounts of different
Tutorial questions, No. 2.1 and 2.7 page 43
2.1) Do you think when a set of financial accounts is being prepared, neutrality
should override prudence that?
There are ethical rules relate to the moral code or principles expected that
can be adopted for the preparation of accounts, one of which is Prudence.
accountants must be careful, accountants must follow accounting rules.
neutrality should not override prudence, but objectivity and prudence must
2.7) The following is a list of problems which an accountant may well meet in
a) The transfer fee of a footballer.
Boundary rules ( going concern )
We consider the transfer fee of football as an entity, that it will
continue in business for the foreseeable future for at least the next 12
months from the accounting year-end.
b) Goods are sold in one period but the cash for them is received in a later
Measurement rules ( realisation )
The statement is in accordance with realization, where the goods are
sold or bought or sold on credit terms
c) The proprietor’s personal dwelling house has been used as security for a
loan which the bank has granted to the company.
Measurement rules ( dual aspect )
That is in accordance with dual aspects, where any transaction involves
someone giving something and someone else receiving. the company
received cash, but on the other, it has a liability as eventually it has to
pay the loan back to the bank
d) What profit to take in the third year of a five-year construction contract.
Measurement rules ( money measurement )
We all know that the value of money is not static, the value of money
changes over a period of time. we don't know how much profit we will
get. We can benefit from deflation and losses when inflation. as right
inside measurement rules
e) Small stocks of stationery held at the accounting year end.
measurement rules ( materiality )
Small stocks of stationary worth may be material to a one-person
business but mean nothing to a multinational company. it is materiality
is a matter of context; it requires judgment and different people will
come to a different conclusion.
f) Expenditure incurred in working on the improvement of a new drug.
measurement rules ( matching )
There is a cost in this, which means that it will reduce our assets,
1. Which accounting rule would the accountant most probably adopt
in dealing with each of the above problems?
2. State the reasons for your choice.
b. Please have access on PSAK, then describe what you learn from it.
Standar Akuntansi Keuangan (SAK) Financial Accounting Standards. They
are Statement of Financial Accounting Standards = Pernyataan Standar
Akuntansi Keuangan (PSAK) and Interpretation of Financial Accounting
Standards Interpretasi Standar Akuntansi Keuangan (ISAK) issued by the
Indonesian Accountants Association Standard Board= Dewan Standar Ikatan
Akuntan Indonesia (DSAK IAI) and the Sharia Standards Board of the
Indonesian Accountants Association =Dewan Standar Syariah Ikatan Akuntan
Indonesia (DSAS IAI) as well as capital market regulatory regulations for
entities under their supervision.
PSAK establishes principles for the presentation of financial statements with a
general objective in order to create uniformity in the delivery of financial
statements. PSAK contains very important information and data related to
financial reports. The standards that exist in PSAK and are still in effect must
be followed by accountants in making various matters or reports related to the
scientific field of accounting. PSAK is a guideline that must be followed by
accounting workers in Indonesia
The first SAK is a Statement of Financial Accounting Standards which
refers to the standards made by IFRS
The second SAK is SAK-ETAP, namely Financial Accounting Standards
prepared and applied to Entities without Public Accountants (ETAP)
Statement of Islamic Financial Accounting Standards (PSAK-Syariah) or
what is often referred to as the Islamic Accounting Standards (SAS), is a
standard made for institutions that use sharia bases.
The latest SAK is the Government Accounting Standard (SAP) which is
prepared and issued by the Governmental Accounting Standards
Committee and has been designated as a Government Regulation (PP).