What you’ll learn to do: Explore the fundamentals of accounting

The primary objective of financial accounting reporting is to provide useful, relevant information to lenders and investors. That is why the FASB has constructed the conceptual framework of accounting rules called Generally Accepted Accounting Principles. Underlying the conceptual framework is the notion that in order for the information to be useful, it has to be complete, neutral, and free from material error.

In this section, we’ll describe the concept of the economic accounting entity and the importance of the going concern concept; define consistency, full disclosure, materiality, verifiability, and importance of making conservative choices in accounting policies; and explain the accrual basis of accounting and how it is different than the cash basis that you are probably more familiar with.