Define financial accounting and describe the four main elements in the definition of financial accounting.

Financial accounting is the process of identifying, measuring, and communicating financial information about

an economic entity to various user groups within the political, social, legal and economic environment.

The four major elements of financial accountingare: (Select four that best describe the majorelements.)

A.

Environment- thelegal, economic,political, or social setting that shapes and influences the financial reporting process.

B.

Economic entities- An economic entity is an organization or unit whose activities are separate from its owners and other entities. Economic entities can becorporations, partnerships, soleproprietorships, or governmentalorganizations, and may be privately held or publicly held.

C.

Principles-based standards- standards consistent with a theoretical framework.

D.

User groups- demand financial information about an economic entity. Users includeinvestors, creditors,competitors, financialanalysts, employee and laborunions, suppliers,customers, and government agencies.

E.

Financial information- includes items such as the footnotes to the financialstatements, the letter to theowners, management's discussion andanalysis, theauditors' report, the managementreport, and press releases.

F.

Accounting standard setters- developconcepts, rules and guidelines for financial reporting.

G.

Rules-based standards- standards consistent withspecific, prescriptive rules.