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Explained qualitative characteristics of accounting information? ( in points)
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Characteristic # 1. Relevance:
Relevance is closely and directly related to the concept of useful information. Relevance implies that all those items of information should be reported that may aid the users in making decisions and/or predictions. In general, information that is given greater weight in decision-making is more relevant.
Characteristic # 2. Reliability:
Reliability is described as one, of the two primary qualities (relevance and reliability) that make accounting information useful for decision-making. Reliable information is required to form judgements about the earning potential and financial position of a business firm. Reliability differs from item to item.
Characteristic # 3. Understandability:
Understandability is the quality of information that enables users to perceive its significance. The benefits of information may be increased by making it more understandable and hence useful to a wider circle of users. Presenting information which can be understood only by sophisticated users and not by others, creates a bias which is inconsistent with the standard of adequate disclosure.
Characteristic # 4. Comparability:
Economic decision requires making choice among possible courses of actions. In making decisions, the decision-maker will make comparisons among alternatives, which is facilitated by financial information. Comparability implies to have like things reported in a similar fashion and unlike things reported differently.
Characteristic # 5. Consistency:
Consistency of method over a period of time is a valuable quality that makes accounting numbers more useful. Consistent use of accounting principles from one accounting period to another enhances the utility of financial statements to users by facilitating analysis and understanding of comparative accounting data.
Characteristic # 6. Neutrality:
Neutrality is also known as the quality of ‘freedom from bias’ or objectivity. Neutrality means that, in formulating or implementing standards, the primary concern should be the relevance and reliability of the information that results, not the effect that the new rule may have on a particular interest or user(s).
Characteristic # 7. Materiality:
The concept of materiality permeates the entire field of accounting and auditing. The materiality concept implies that not all financial information need or should be communicated in accounting reports—only material information should be reported.
Characteristic # 8. Timeliness:
Timeliness means having information available to decision-makers before it loses its capacity to influence decisions. Timeliness is an ancillary aspect of relevance. If information is either not available when it is needed or becomes available long after the reported events that it has no value for future action, it lacks relevance and is of little or no use. Timeliness alone cannot make information relevant, but a lack of timeliness can rob information of relevance it might otherwise have had.
Characteristic # 9. Verifiability:
The quality of verifiability contributes to the usefulness of accounting information because the purpose of verification is to provide a significant degree of assurance that accounting measures represent, what they purport to represent. Verification does not guarantee the suitability of method used, much less the correctness of the resulting measure.
Characteristic # 10. Conservatism:
Conservatism is generally referred to as a convention that many accountants believe to be appropriate in making accounting decisions.
Characteristic # 11. Substance over Form (Economic Realism):
Economic realism is not usually mentioned as a qualitative criterion in accounting literature, but it is important to investors. It is a concept, that seems easy to understand but hard to define because perceptions of reality differ. In essence, economic reality means an accurate measurement, of the business operations, that is, economic costs and benefits generated in business activity.
Hope this helps you ☺️
Characteristic # 1. Relevance:
Relevance is closely and directly related to the concept of useful information. Relevance implies that all those items of information should be reported that may aid the users in making decisions and/or predictions. In general, information that is given greater weight in decision-making is more relevant.
Characteristic # 2. Reliability:
Reliability is described as one, of the two primary qualities (relevance and reliability) that make accounting information useful for decision-making. Reliable information is required to form judgements about the earning potential and financial position of a business firm. Reliability differs from item to item.
Characteristic # 3. Understandability:
Understandability is the quality of information that enables users to perceive its significance. The benefits of information may be increased by making it more understandable and hence useful to a wider circle of users. Presenting information which can be understood only by sophisticated users and not by others, creates a bias which is inconsistent with the standard of adequate disclosure.
Characteristic # 4. Comparability:
Economic decision requires making choice among possible courses of actions. In making decisions, the decision-maker will make comparisons among alternatives, which is facilitated by financial information. Comparability implies to have like things reported in a similar fashion and unlike things reported differently.
Characteristic # 5. Consistency:
Consistency of method over a period of time is a valuable quality that makes accounting numbers more useful. Consistent use of accounting principles from one accounting period to another enhances the utility of financial statements to users by facilitating analysis and understanding of comparative accounting data.
Characteristic # 6. Neutrality:
Neutrality is also known as the quality of ‘freedom from bias’ or objectivity. Neutrality means that, in formulating or implementing standards, the primary concern should be the relevance and reliability of the information that results, not the effect that the new rule may have on a particular interest or user(s).
Characteristic # 7. Materiality:
The concept of materiality permeates the entire field of accounting and auditing. The materiality concept implies that not all financial information need or should be communicated in accounting reports—only material information should be reported.
Characteristic # 8. Timeliness:
Timeliness means having information available to decision-makers before it loses its capacity to influence decisions. Timeliness is an ancillary aspect of relevance. If information is either not available when it is needed or becomes available long after the reported events that it has no value for future action, it lacks relevance and is of little or no use. Timeliness alone cannot make information relevant, but a lack of timeliness can rob information of relevance it might otherwise have had.
Characteristic # 9. Verifiability:
The quality of verifiability contributes to the usefulness of accounting information because the purpose of verification is to provide a significant degree of assurance that accounting measures represent, what they purport to represent. Verification does not guarantee the suitability of method used, much less the correctness of the resulting measure.
Characteristic # 10. Conservatism:
Conservatism is generally referred to as a convention that many accountants believe to be appropriate in making accounting decisions.
Characteristic # 11. Substance over Form (Economic Realism):
Economic realism is not usually mentioned as a qualitative criterion in accounting literature, but it is important to investors. It is a concept, that seems easy to understand but hard to define because perceptions of reality differ. In essence, economic reality means an accurate measurement, of the business operations, that is, economic costs and benefits generated in business activity.
Hope this helps you ☺️
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