ACCOUNTING

CONCEPTUAL
FRAMEWORK
BY: WARDAH FAHIRA 1802111817
The conceptual framework is a system that
deals with the objectives and concepts that
underlie accounting that can derive
consistent standards in describing the
nature, functions and limitations of
financial accounting and its reporting.
 FORMULATION OF A CONCEPTUAL
FRAMEWORK
• SFAC No 1: Objectives of Financial Reporting by Business
Enterprises (1978)
• SFAC No 2: Qualitative Characteristics of Accounting Information
(1980)
• SFAC No 3: Element of Financial Statement of Business
Enterprises (1980)
• SFAC No 4: Objectives of Financial Reporting by Non Business
Organizations (1980)
• SFAC No 5: Recognition and Measurement in Financial Statement
of Business Enterprises (1984)
• SFAC No 6: Element of Financial Statement : A Replacement of
FASB Concept Statement No 3 (1985)
PURPOSE OF FINANCIAL REPORTING

• Provide useful information for investors, creditors and other

potential users in assisting the process of making rational
decisions on investment, credit and other similar decisions;
• Provides useful information for investors, creditors and
other potential users that helps in assessing the amount,
timing and uncertainty of prospects for cash receipts from
dividends or interest and income from the sale, redemption
or maturity of securities or loans. Estimating future cash
flow at the company; and
• Provide information about economic resources, claims on
these resources and their changes.
 QUALITATIVE CHARACTERISTICS OF
FINANCIAL STATEMENTS

1. Understandability
2. Relevance
3. Reliability
4. Comparability
 ELEMENT OF FINANCIAL
STATEMENT

 Asset
 Liability
 Equity
 Income
 Expense
 ASSUMPTIONS
Economic Entity
Going Concern
Monetary Unit
Periodicity
 PRINCIPLES
1) Historical Cost
2) Revenue Recognition
3) Matching Principle
4) Full Disclosure
 CONSTRAINTS
• Cost-benefit Relationship
• The Materiality Principle
• Industry Practice
• The Conservatism Principle
THANK YOU!