ACCF 111 NOTES
Chapter 2: The Conceptual FrameworK
1. Purpose
• Provides the theoretical foundation for all accounting
standards. It ensures consistency and logic in nancial
reporting.
2. Objective of Financial Reporting
• To provide useful nancial information to existing and
potential investors, lenders, and creditors for decision-
making.
3. Underlying Assumptions
• Accrual Basis: Record transactions when they occur,
not when cash is paid/received.
• Going Concern: Assumes the business will continue
operating in the foreseeable future.
4. Qualitative Characteristics of Useful Information
• Fundamental:
o Relevance: Information can in uence decisions.
o Faithful Representation: Information is complete,
neutral, and free from error.
• Enhancing
o Comparability, Veri ability, Timeliness,
Understandability.
5. The Elements of Financial Statements
• Asset: A resource controlled by the entity as a result
of a past event, with future economic bene ts (e.g.,
cash, equipment).
• Liability: A present obligation to transfer an economic
resource as a result of a past event (e.g., loans,
creditors).
Chapter 2: The Conceptual FrameworK
1. Purpose
• Provides the theoretical foundation for all accounting
standards. It ensures consistency and logic in nancial
reporting.
2. Objective of Financial Reporting
• To provide useful nancial information to existing and
potential investors, lenders, and creditors for decision-
making.
3. Underlying Assumptions
• Accrual Basis: Record transactions when they occur,
not when cash is paid/received.
• Going Concern: Assumes the business will continue
operating in the foreseeable future.
4. Qualitative Characteristics of Useful Information
• Fundamental:
o Relevance: Information can in uence decisions.
o Faithful Representation: Information is complete,
neutral, and free from error.
• Enhancing
o Comparability, Veri ability, Timeliness,
Understandability.
5. The Elements of Financial Statements
• Asset: A resource controlled by the entity as a result
of a past event, with future economic bene ts (e.g.,
cash, equipment).
• Liability: A present obligation to transfer an economic
resource as a result of a past event (e.g., loans,
creditors).
