Chase_6615_Case2-1 - important because it helps distinguish...

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Andrew Chase Frank Corti Accounting 6615 Case 2-1 (a) The purpose and benefit of conceptual framework is that is used as a foundation for setting accounting standards, and can be used to resolve accounting controversies. Conceptual framework helps to solve new and emerging problems by referring to an already existing framework of basic theory. The conceptual framework also increases users’ understanding and confidence in financial accounting, as well as enhancing comparability among financial statements. (b) SFAC No. 1 “Objectives of Financial Reporting by Business Enterprises” is very important because it provides the needed information for investors to analyze the financial strength of an organization. This is done by evaluating an organization’s ability to generate cash and overall financial position. The financial statements provide the most useful information possible at the least cost. SFAC No. 2 “Qualitative Characteristics of Accounting Information” is also
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Unformatted text preview: important because it helps distinguish between more useful and less useful information in the decision making process. This is done by providing information that is relevant and capable of making a difference in a decision. The information also must be reliable in the fact that it is verifiable and is free from error or bias. This is very important because it may seem commonplace, but it is very important that a user does not have to contemplate whether or not the information is true or not. SFAC No. 6 “Elements of Financial Statements” is important because these elements define accounting terms and is the “language” of accounting. This is extremely important because these accounting terms have very specific and distinctive meanings. These terms are vital in understanding how to measure the performance and financial status of a business enterprise....
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