Question

Why do we need a Conceptual Framework? What is the objective of Financial Reporting?

Answer 1

A Conceptual Framework for accounting is needed to set the accounting standards and solving accounting disputes and problems. It facilitates the understanding of user of financial statements. It also facilitates comparison of accounting statements of different companies.

Objectives of Financial Reporting

The objective of financial reporting is to provide

1. Information to Management (to facilitate planning and decision making).
2. Information to Investors, Debtors, Creditor (to help them in taking sound financial decisions).
3. Information to Shareholders and Public ( about various decisions of organization).
4. Information about financial status of company (Profit and Loss Statement and Balance Sheet).
5. Information to Statutory Auditor for auditing books.
6. Information to Customers (how the company is conducting itself).
7. Information about how the company is using its resources.