ACCT 301 Lecture 2: Accounting Study Guide Ch 02
Document Summary
Study objective 1 - explain the meaning of generally accepted accounting principles and describe the basis. The basic objective for financial reporting is to provide information useful for decision making. Generally accepted accounting principles (gaap) are the agreed-upon accounting rules which most u. s. companies use in preparing financial statements. Gaap are promulgated by the financial accounting standards. Study objective 2 - discuss the qualitative characteristics of accounting information. In order to be useful, financial information should possess the following qualitative characteristics: Relevance - if information has the ability to make a difference in a decision scenario, it is relevant. Accounting information is also relevant to business decisions because it confirms or corrects prior expectations. Financial statements both help predict future events and confirm or correct prior expectations about the financial health of the company. In order to be relevant accounting information must be timely. Reliability - information is reliable if it can be depended on.
