Explain the qualitative characteristics of accounting information.
Explain the qualitative characteristics of accounting information.
Following are the qualitative characteristics of accounting information :
1. Reliability: The basic purpose of accounting is to provide information to the management, owners or whoever genuinely interested in it. The information is meaningful only if it is
reliable. The reliable information enables accurate decision making. It should be verifiable. I should lead to a same or similar conclusion when analyzed by different accounting professionals.
2. Relevance: There is a lot of information about a business having no practical use. Accounting should be concise and precise. Meaningless information makes the analysis difficult. A report stuffed with immaterial information simply wastes time. A decision is made on the basis of facts. Therefore it is essential to ensure that a person searching for it does not have to search the facts hidden deep in the garbage of irrelevant information.
3. Understandability: Information is useful only when it is understandable. This does not mean that every layman should be able to understand the information presented in an accounting report. Understandability means the information is presented in a universally accepted accounting format which every accountant is able to understand and explain. International accounting standards enable o to ensure accounting information is processed and presented in a uniform manner, which paves a way to accurate analysis and interpretation.
4. Comparability: Accounting information should enable a comparison between the results of different years of the same company. It should also enable comparison between different business houses in the same industry.
Following are the qualitative characteristics of accounting information :
1. Reliability: The basic purpose of accounting is to provide information to the management, owners or whoever genuinely interested in it. The information is meaningful only if it is
reliable. The reliable information enables accurate decision making. It should be verifiable. I should lead to a same or similar conclusion when analyzed by different accounting professionals.
2. Relevance: There is a lot of information about a business having no practical use. Accounting should be concise and precise. Meaningless information makes the analysis difficult. A report stuffed with immaterial information simply wastes time. A decision is made on the basis of facts. Therefore it is essential to ensure that a person searching for it does not have to search the facts hidden deep in the garbage of irrelevant information.
3. Understandability: Information is useful only when it is understandable. This does not mean that every layman should be able to understand the information presented in an accounting report. Understandability means the information is presented in a universally accepted accounting format which every accountant is able to understand and explain. International accounting standards enable o to ensure accounting information is processed and presented in a uniform manner, which paves a way to accurate analysis and interpretation.
4. Comparability: Accounting information should enable a comparison between the results of different years of the same company. It should also enable comparison between different business houses in the same industry.
