Conceptual Framework Of Accounting

Front 1

Relevance

Back 1

Accounting information must be capable of making a difference in a decision

Front 2

Predictive Value

Back 2

Financial information that has value as an input to predictive processes used by investors to form their own expectations about the future

Front 3

Confirmatory Value

Back 3

Information that helps users confirm or correct prior expectations

Front 4

Materiality

Back 4

Information that could influence decisions of the users by omitting or misstating it.

Front 5

Faithful Representation

Back 5

the numbers and descriptions match what really existed or happened

Front 6

Completeness

Back 6

All the information that is necessary for faithful representation is provided

Front 7

Neutrality

Back 7

Specific information has not been selected to favor one set of interested parties over another. Unbiased information must be the overriding consideration

Front 8

Comparability

Back 8

Information that is measured and reported in a similar manner for different companies. It enables users to identify the real similarities and differences in economic events between companies

Front 9

Verifiability

Back 9

Occurs when independent measurers, using the same methods, obtain similar results

Front 10

Understandability

Back 10

The quality of information that lets reasonably informed users see its significance.

Front 11

Economic entity assumption

Back 11

The assumption that economic activity can be identified with a particular unit of accountability. (The company is a separate entity from its owners)

Front 12

Going concern assumption

Back 12

Assumes that the company will have a long life

Front 13

Monetary Unit Assumption

Back 13

Money is the common denominator of economic activity and provides an appropriate basis for accounting measurement and analysis.

Front 14

Periodicity

Back 14

implies that a company can divide its economic activities into artificial time periods