Slide1 l.jpg
This presentation is the property of its rightful owner.
Sponsored Links
1 / 11

CHAPTER 2 PowerPoint PPT Presentation


  • 245 Views
  • Uploaded on
  • Presentation posted in: General

CHAPTER 2. Conceptual Framework Underlying Financial Accounting. ……..…………………………………………………………. Conceptual Framework. Coherent system Objectives & characteristics Principles & assumptions. Within which rules and standards are developed. Levels within the Framework. Useful Information.

Download Presentation

CHAPTER 2

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


Slide1 l.jpg

CHAPTER 2

Conceptual Framework

Underlying Financial Accounting

……..…………………………………………………………...

Conceptual Framework

  • Coherent system

  • Objectives & characteristics

  • Principles & assumptions

  • Within which rules and standards are developed


Slide2 l.jpg

Levels within the Framework

Useful Information

Basic objectives

Qualitative characteristics

Unbiased

Basic principles

Historical Cost Principle

Accounting standards

Record plant assets at historical cost.


Slide3 l.jpg

FIRST LEVEL: BASIC OBJECTIVES

  • Information useful to stockholders and creditors

  • Helpful in assessing amount and timing of future cash flows

  • Information regarding assets and liabilities


Slide4 l.jpg

SECOND LEVEL: FUNDAMENTAL CONCEPTS

Relevant

Reliable

Comparable

Consistent

Qualitative Characteristics

Useful


Slide5 l.jpg

Predictive

Value

Verifiable

Feedback

Value

Faithful

Representation

Timely

Unbiased

Relevant

Reliable


Slide6 l.jpg

Assets

Liabilities

Equity

-

=

Revenues

Expenses

Gains

Losses

Basic Elements

Increase in Net Assets

Decrease in Net Assets

Owner

Investment

Distribution

to Owners

Comprehensive

Income


Slide7 l.jpg

THIRD LEVEL:

RECOGNITION AND MEASUREMENT CONCEPTS

Basic Assumptions

  • Economic entity

  • Going concern

  • Monetary unit

$

$

  • Periodicity


Slide8 l.jpg

Basic Principles

  • Historical cost

Assets & liabilities recorded at historical cost

Verifiable

Unbiased

Exceptions:

investments

receivables

inventories

  • Revenue recognition

Recognized when realized

and earned.

Faithful representation

Exceptions:

long-term contracts

minerals

installment sales


Slide9 l.jpg

  • Matching

“Let the expense follow the revenues.”

Predictive & Feedback value

When there is no connection:

rational allocation

expense immed.

  • Full disclosure

Detail and condensation for informed decisions.

Predictive & Feedback value

3 sources:

financial stmnts

notes

supplementary info


Slide10 l.jpg

  • Costs outweigh the benefits

    • Cost of collecting information

    • Losing a competitive edge

  • Amounts are immaterial

    • An impact on decision makers

    • Quantitative & qualitative factors

  • Conservatism

Exceptions to the Rules

  • Special industry practices


Slide11 l.jpg

Exercise 2-5

(b)Lower of cost or market is used to value inventories

instead of historical cost.

(e)Repair tools are expensed when purchased

rather than being recorded as assets and depreciated.

(h)All important aspects of bond contracts are reported

,

not just the amount of the bond.


  • Login