Management Accounting

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Management Accounting

By | November 2012
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In the account thing context, conceptual framewrok is defined by a coherent system of concepts that underlie financial reporting. Further more, the conceptual framework is a normative environment. thus it prescribes the basic principles that are to be followed in preparing financial statements. to be exact, conceptual framework is concern with the general purpose financial statements. GPFS are financial statements or report intended to meet information needs common to users who are unable to command the preparation of reports tailored to satisfy, specifically, all their information needs. One of the example of GPFS is an annual report.

Therefore, the users and preparers of financial statements seeks information from annual reports to satisfy their own information needs to make decisions.

However in order to prepare a “qualify” financial reporting and adequate info for better decision making, financial statements must be prepared according to the accounting requirements. Accounting requirements or accounting standards in other words means an authorative statements that guide the preparation of financial statements.

This in turns, leads back to conceptual framework because accounting standard is created with the guidance of conceptual framework. Before going into how does it help users and preapres to understand financial statements & accounting requirements. We need to understand the difference between accounting standard and conceptual framework. Conceptual framework’s principles are general concepts and is designed to provide guidance and apply to a wide range of decisions relation to the preparation of financial reports. Accounting standards on the other hand, provide specific requirements for a particular area of financial reporting. Eg: Conceptual framework – defines what an asset is & when it should be included in the financial statements Ace standards – on leases ( 1AS17 or AASB 117) contains detailed requirements and guidance on when an assets...
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