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    Note 2

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    Isah
    The document discusses the conceptual framework and accounting standards. It defines key terms like assets, liabilities, equity, income and expenses. It also outlines the objectives of general purpose financial reporting and the qualitative characteristics that make information useful for financial statement users.

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    Note 2

    Uploaded by

    Isah
    7 views3 pages
    The document discusses the conceptual framework and accounting standards. It defines key terms like assets, liabilities, equity, income and expenses. It also outlines the objectives of general purpose financial reporting and the qualitative characteristics that make information useful for financial statement users.

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    NOTE 2

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    The document discusses the conceptual framework and accounting standards. It defines key terms like assets, liabilities, equity, income and expenses. It also outlines the objectives of general purpose financial reporting and the qualitative characteristics that make information useful for financial statement users.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    7 views3 pages

    Note 2

    Uploaded by

    Isah
    The document discusses the conceptual framework and accounting standards. It defines key terms like assets, liabilities, equity, income and expenses. It also outlines the objectives of general purpose financial reporting and the qualitative characteristics that make information useful for financial statement users.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    You are on page 1of 3

    CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARS (NOTE 2)

    CONCEPTUAL FRAMEWORK - Set A. Completeness


    outs concepts that underlie the preparing and B. Neutrality
    presentation of financial statements for C. Free from error
    external users. 3. Comparability
     Conceptual Framework is not a PFRS. 4. Verifiability
    When there is a conflict between them, 5. Timeliness
    PFRS will prevail. 6. Understandability
     In the absence of a standard, management
    shall consider the conceptual framework ELEMENTS OF FINANCIAL
    in making its judgement in developing and STATEMENTS :
    applying an accounting policy that results in Financial Position :
    information that is relevant and reliable. 1. Asset - Resource controlled by the
     Conceptual framework is concerned with entity as a result of past events from
    general purpose financial statements. which future economic benefits to flow
    the entity.
    2. Liability - Present obligation of the
    OBJECTIVE OF GENERAL-PURPOSE entity arising from past events. Is
    FINANCIAL REPORTING : expected to result in an outflow from
     To provide financial information about the the entity of resources.
    reporting entity that is useful to existing. 3. Equity - Assets less liabilities.
     To show the result of stewardship of Performance :
    management. 1. Income - Encompasses both (A)
     Forms the foundation of the conceptual revenues and (B) gains
    framework. 2. Expense - Encompasses both (B)
    expenses and (losses)
    USER AND THEIR NEEDS :
    RECOGNITION - Process of
     Primary Users - General purpose financial
    incorporating in the balance sheet or
    reports are directed :
    income statement an item that meets the
    A. Existing and potential investors.
    definition of an element and satisfies the
    B. Lenders and other creditors.
    recognition criteria.
     Only the common needs of primary users are
    met by the financial statements.

     An item is recognized if all of the following


    are satisfied :
    A. The item meets the definition of an
    element;
    QUALITATIVE CHARACTERISTICS
    B. It is probable that any future
    I. Fundamental Qualitative Characteristics
    economic benefit associated with the
    1. Relevance
    item will flow to or from the entity;
    A. Predictive Value
    and
    B. Feed Back Value
    C. The item has a cost or value that can
     Materiality – Entity-specific aspect of
    be measured with reliability.
    relevance.
    2. Faithful representation
    EXPENSE RECOGNITION PRINCIPLES :
    CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARS (NOTE 2)

    1. Direct association or matching


    2. Systematic and rational allocation
    3. Immediate recognition

    MEASUREMENT BASES :
    A. Historical Cost
    B. Current Cost
    C. Realizable Value (Settlement Value)
    D. Present Value

    CONCEPTS OF CAPITAL AND CAPITAL


    MAINTENANCE
     Financial Concept of Capital - Regarded
    as the invested money or invested
    purchasing power.
     Capital is synonymous with equity or net
    assets.
     Physical Concept of Capital - Regarded as
    the entity's productive capacity, e.g., units
    of output per day.

    LEARNING OBJECTIVES :
    1. State the basic purpose, authoritative status,
    and scope of the Conceptual Framework.
     Conceptual framework is a preparation and
    presentation of financial statements for the
    external users.
     In the absence of the standard, the
    management shall consider the conceptual
    framework in making its judgment.
     Conceptual framework is concerned with
    general purpose financial statement.

    2. State the objective of financial reporting.

     The objectives of financial reporting are the


    following :
    A. To provide information about the
    reporting entity that is useful/worth
    existing.
    CONCEPTUAL FRAMEWORK & ACCOUNTING STANDARS (NOTE 2)

    B. To show the stewardship of the


    management.
     The objectives of general purpose financial
    reporting forms the foundation of conceptual
    framework.

    3. Identify the primary users of financial


    statements.
     The primary users of financial statements
    are the following :
    A. The existing investors and potential
    investors.
    B. Lenders and other creditors.

    4. Explain briefly the qualitative characteristics


    of useful information and how they are applied
    in financial reporting.
     Qualitive characteristics are the tributes that
    your financial statements should have, to
    have an information that is reliable and
    useful to the users.
     They are applied by making your financial
    stametn :
    A. Relevant
    B. Had Faithful Representation
    C. Comparable
    D. Verifiable
    E. Timeliness
    F. Understandable
    5. Define the elements of financial statements
    and state their recognition criteria.
    ELEMENTS OF FINANCIAL STATEMENTS :
     Asset
     Liability
     Equity
     Income
     Expense

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