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Australian Accounting Conceptual Framework Theory - Coursework Example

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"Australian Accounting Conceptual Framework Theory" paper states that the preparation of the financial statements must be based on the objectives of providing important financial information to an external user. This will facilitate users to make crucial decisions related to resource allocation…
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Australian Accounting Conceptual Framework Theory
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Download file to see previous pages Financial reporting also referred to as external reporting, provides the necessary information to users not having the necessary authority to obtain the relevant information from a business entity. Financial Accounting Standard Board (FASB) of the US developed the “first conceptual framework” in accounting. A conceptual framework in accounting leads to better financial reporting and this can provide several benefits to the users of the financial statements, assisting them in making decisions relating to resource allocation (Cathstocx Ltd, n.d.).

The conceptual framework basically answers the two questions relating to what one is attempting to do and how this is going to be done. It provides answers related to the purpose of the preparation of accounts and decides the suitability of the reports for the required purpose. It also offers ways of making improvements in accounting practices in order to make them more suitable. Therefore this framework basically revolves around the accounting objectives as well as the methods of preparation of the accounts. This mainly assists in making decisions related to the choice of “accounting practice” and establishes accounting standards (Macwe, 1997, pp. 45).

An individual recommending a conceptual framework must base his choice on a clear conceptual framework. While deciding on the accounting policy to be followed, an accountant or an auditor or even the company director must ensure that the treatment presents a fair and true view. Like for instance if there is a recommendation for the accounting standard relating to “uniform disclosure of leasing commitments” one must have an idea about the consequences of such disclosures and the interests of those served by it. The conceptual framework of FASB is concerned with the calculation and reporting of the assets, equity, liabilities, and income components. ...Download file to see next pagesRead More
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