Summary

1. Accounting Convention Rules

a. Boundary Rules
- Entity: It is strictly separate the affairs of a business from the private affairs of its
owners
- Periodicity: If a company is set up today, then the year end of that company
would be 12 months from today
- Going concern: it is assumed that it will continue in business for the foreseeable
future for at least the next 12 months from the accounting year end
- Monetary quantities: Non-monetary considerations (length of the business has
been in existence or the length of service of the staff)
b. Measurement Rules
- Money measurement: money currency, money value changes
- Historic cost: price of asset or liability at the first time (when exchanged), value
does not change
- Realization: legal title transfer of goods or services bought/sold on credit
(realized).
- Matching: close to realization rule, comparing the cash received/cash paid, it is
necessary to allow for what was owed to the entity (i.e. ‘receivable’) and owing
(i.e. ‘payable’)
- Dual aspect: every transaction has two effects (even if it is an internal
transaction), double entry system (bookkeeping)
- Materiality: significance or insignificance of the value, materiality is a matter of
context; it requires judgement and different people will come to a different
conclusion
c. Ethical Rules
- Prudence: helps to preserve the cautious, careful and pernickety perception of the
typical old-fashioned accountant. If doubt on transaction, profit underestimate,
expense overestimate, thus less cash excessive danger.
- Consistency: same accounting rules and policies for successive period\
 - Objectivity: requires accountants and managers to avoid personal bias and
prejudice when selecting and applying the accounting rules
- Relevance: financial statements should give a true and fair view of the financial
affairs of the entity
2. Accounting standard is the statements of standard accounting practice issued by such
body as may be prescribed by regulations.
3. International accounting standards: IFRS (Europe) & GAAP (USA)
4. Accounting framework: a cohesive economic unit, its boundary being determined by
what it can control both directly and indirectly
5. Indonesia accounting standard is PSAK