Assignment 2 - Basic Accounting Concepts and Business Structures
Assignment 2
Basic Accounting Concepts and Business Structures
Basic Accounting Concepts and Business Structures
Before the Great Depression and the crash of the stock market, there were no groups governing the accounting world, nor had any principles been put into place. Because of this, various groups and GAAP had to be formed to ensure that quality financial reporting was exhibited. There are still discrepancies in accounting but with the hierarchy of sources and good accounting qualities, it makes it easier to understand what is being presented. Additionally, with the different ways enterprises account for money and the distinctive business structures, having these written standards makes all companies accountable.
The four organizations that make up the hierarchy are the SEC, AICPA, FASB, and the GASB. The SEC was formed to assist in establishing and assimilating financial information that is presented to stockholders. The AICPA and FASB, who develops the standards for the private sector, are supported by the SEC. They believed that the private sector had the resources to fulfill this responsibility. Even though the standards are written by the AICPA and the FASB, the SEC may reject a standard or press the private sector into acting swiftly. To form a partnership, all three work together. The GASB’s roll is the same as the FASB’s, only it is for state and government agencies. These entities must follow uniform procedures still.
Users of financial statements need useful, relevant and reliable accounting information as well as the comparability and consistency of reported information. Therefore, principles and guidelines were developed called Conceptual Framework. The framework is essentially a foundation for building a comprehensible and systematic set of standards for the accounting world. It is to be used as a reference for solving problems in reporting.
When speaking of relevant information, it must
Basic Accounting Concepts and Business Structures
Basic Accounting Concepts and Business Structures
Before the Great Depression and the crash of the stock market, there were no groups governing the accounting world, nor had any principles been put into place. Because of this, various groups and GAAP had to be formed to ensure that quality financial reporting was exhibited. There are still discrepancies in accounting but with the hierarchy of sources and good accounting qualities, it makes it easier to understand what is being presented. Additionally, with the different ways enterprises account for money and the distinctive business structures, having these written standards makes all companies accountable.
The four organizations that make up the hierarchy are the SEC, AICPA, FASB, and the GASB. The SEC was formed to assist in establishing and assimilating financial information that is presented to stockholders. The AICPA and FASB, who develops the standards for the private sector, are supported by the SEC. They believed that the private sector had the resources to fulfill this responsibility. Even though the standards are written by the AICPA and the FASB, the SEC may reject a standard or press the private sector into acting swiftly. To form a partnership, all three work together. The GASB’s roll is the same as the FASB’s, only it is for state and government agencies. These entities must follow uniform procedures still.
Users of financial statements need useful, relevant and reliable accounting information as well as the comparability and consistency of reported information. Therefore, principles and guidelines were developed called Conceptual Framework. The framework is essentially a foundation for building a comprehensible and systematic set of standards for the accounting world. It is to be used as a reference for solving problems in reporting.
When speaking of relevant information, it must