Intermediate Accounting, 18th Edition, By Donald E
Intermediate Accounting, 18th Edition, by Donald E
Exam (elaborations)
Chapter 2 Intermediate Accounting: Questions
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Intermediate Accounting, 18th Edition, by Donald E
Institution
Intermediate Accounting, 18th Edition, By Donald E
1. What is a conceptual framework? Why is a conceptual framework necessary in financial accounting? - ANS 1. A conceptual framework is a coherent system of interrelated objectives and fundamentals that can lead to consistent standards and that prescribes the nature, function, and limits of ...
Intermediate Accounting, 18th Edition, by Donald E
Intermediate Accounting, 18th Edition, by Donald E
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Chapter 2 Intermediate
Accounting: Questions
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1. What is a conceptual framework? Why is a conceptual framework necessary in financial
accounting? - ANS 1. A conceptual framework is a coherent system of interrelated
LA
objectives and fundamentals that can lead to consistent standards and that prescribes the
nature, function, and limits of financial accounting and financial statements. A conceptual
framework is necessary in financial accounting for the following reasons:
(1) It enables the FASB to issue more useful and consistent standards in the future.
(2) New issues will be more quickly solvable by reference to an existing framework of basic
theory.
C
(3) It increases financial statement users' understanding of and confidence in financial reporting.
(4) It enhances comparability among companies' financial statements.
2. What is the primary objective of financial reporting? - ANS 2. The basic objective is to
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provide financial information about the reporting entity that is useful to present and potential
equity investors, lenders, and other creditors in making decisions about providing resources to
the entity.
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3. What is meant by the term "qualitative characteristics of accounting information"? - ANS
3. "Qualitative characteristics of accounting information" are those characteristics which
contribute to the quality or value of the information. The overriding qualitative characteristic of
accounting information is usefulness for decision making.
4. Briefly describe the two fundamental qualities of useful accounting information. - ANS 4.
Relevance and faithful representation are the two primary qualities of useful accounting
information. For information to be relevant, it should should be capable of making a difference in
a decision by helping users to form predictions about the outcomes of past, present, and future
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