The conceptual framework to accounting


The conceptual framework to accounting

            What  you have learned up to this point in the book is a process thats leads to the preparation of financial reports about a company.these  are the  company financial statements. This area of accounting is called Financial accounting . this recognized set of standarts is called Generally accepted accounting principles (GAAP). “ generally accepted” means that these principles must have “substantial authoritative supports” . such support usually comes from  two  standard-setting bodies : the financial accounting standartsd Board(FASB), And the securities and exchange commission (SEC).

            The FASB conceptual framework consists  of the following four items:

  1. Objectives of  financial reporting
  2. Qualitative characteristics of accounting information
  3. Elemment of financial statements
  4. Operating guidelines (assumption,principles,and constraints)


  1. Objectives of financial reporting

The FASB began to work on the conceptual framework by  looking at the objectives of financial reporting. The FASB  conclude that the objectivities of financial reporting are to provide information that:

  1. Is useful to those making investment and credit decisions
  2. Is helpful in assesing future cash flows
  3. Identifies the economic resources (assets) , the claim of those recources and changes in those recouses and claim

The FASB undertook to describes the characteristic that maked accounting information useful.


  1. Qualitative characteristics of accounting information

To be useful , information should process  the following qualitative characteristics : relevance,reability comparability and consistncy.



  1. Elements of financial statements

The FASB refers to this sets of definition that describes as the Elements of financial statements, They include  such terms as assets,liability,equity, revenues,and expensess



  1. Operating guidelines

In its  conceptual framework , the FASB recognized the need operating guidelines. Its classify these guidelines as assumpsions,principles, and constraints



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