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The main qualitative characteristics of accounting information

Introduction: Qualitative Characteristics of Accounting information is worn in the economic behaviors of accounting and, during the accounting practices reproduce the accounting creature to gain the grade of the value of association and economic information.  Financial status and in use results mainly through accounting information to reproduce. And thus in economic life, the accounting information is the language of corporate financial decision making has also become an international common language of business, which constitutes the important basis for the effective functioning of the economy. The socio economic necessities the smooth and able operation of accounting information can be reflected in the objective which it is true. Of accounting information in the economic life of the position is very significant,

Qualitative Characteristics

The characteristics can be viewed as a chain of command of qualities; Relevance and reliability are the two primary qualities that construct the accounting information useful for decision making. If either is missing completely from a piece of information, the information will not be useful other qualities include comparability, consistency, and Understandability

Decision makers and Understandability

Decision creators vary extensively in the categories of verdicts they make, how they make decisions, the information they previously possess or can attain from other possessions, and their aptitude to process the information. For information to be useful there must be an association between decision makers and the decisions they make. Understandability is the quality of information that consents practically conversant users to recognize its meaning.

There are five main qualitative characteristics of accounting information and particularly financial statements that construct them useful to users. The first two qualitative characteristics concern presentation and apprehension content. These qualitative characteristics are following

01. Relevance

Relevance accounting information is the compilation of a company’s financial dealings. Companies present accounting information to internal and external business stakeholders for creation decisions. Relevant to investors, creditors, and others for investment, credit, and similar decisions, accounting information must be capable of making dissimilarity in a decision. Relevant in sequence should have predictive value, feedback value, and timeliness. Relevant information helps decision makers make predictions about future; it has “Predictive Value”. Relevant information also helps decision makers confirm or accurate previous prospect; it has “Feedback Value” Most companies must present accounting information according to national accounting standards; generally accepted accounting principles (GAAP) symbolize the most trustworthy accounting standards. GAAP requires accounting information to include qualitative characteristics on which business stakeholders can rely.

02. Reliability

Reliability is the quality of information that authorized users to depend on it with assurance. This means it is verifiable, has faithful representation, and is reasonably free of errors and bias. Representative closeness refers to correspondence or agreement between a measure or description and the phenomenon that it purports to represent. That means the numbers and imagery represent what really existed or happened. Accounting information and financial statements should be prepared in such a way that they are free from material error and bias.  That is that they represent faithfully that which they either hold themselves out to represent or could be reasonably expected to represent.  This characteristic includes the following concepts:

I. Realistic demonstration based on “identification criteria”;

II. Material and economic reality as divergent to legal form;

III. Impartiality or detachment free from bias or deformation

IV. Carefulness – vigilance in guessing or charging not overstating assets or revenues, or minimizing liabilities or operating cost

V. comprehensiveness no errors, falsifications, or decapitating presentations, within the bounds of accepted cost benefit precision, and materiality (in financial statements).

03. Comparability: Accounting information and financial statements should be equipped in such a way as to assist assessment of entity information during time and also alongside information from different, but similar, entities.  Comparability results when different enterprises apply the same accounting management to similar events. Compliance with international accounting standards helps to enhance comparability

04. Consistency: Consistency resources conformity from period to period with unchanging policies and procedures. Conformity can be achieved be applying the same accounting treatment to similar events from period to period. Constancy ensures that accounting information is prepared the same way each month or accounting period. Accounting policies and measures often help companies present their accounting information in a consistent manner It does not mean that an enterprise can’t switch form one accounting method to another if the new method is acceptable and is preferable. The enterprise should disclose the reasons and the effect of such change.

05. Understandability: This implies the expression, with clarity, of accounting information in such a way that it will be understandable to users – who are generally assumed to have a reasonable knowledge of business and economic activities Accounting information and financial statements should be prepared in such a way as to facilitate understanding by users of the financial statements.  Information about complex matters should be presented, if important or material.  Users of information and financial statements are assumed to have a reasonable knowledge of business, economy, and accounting and to be willing to study information to gain a reasonable level of financial expertise.

Conclusion: the accounting information is too particular, will enlarge the risk of investor decision-making, therefore the formation of the happening of internal control is leap to influence the entire capital market competence and capital market financing capacity. Thus, accounting information must allow the reader to recognized, so that it can be used properly.

This video explores the changes in the way we find, store, create, critique, and share information. This video was created as a conversation starter, and works especially well when brainstorming with people about the near future and the skills needed in order to harness, evaluate, and create information effectively. High Quality WMV download: www.mediafire.com Quicktime: www.mediafire.com If you are interested in this topic, check out Clay Shirky’s work, especially: www.shirky.com Also check out David Weinberger’s Everything is Miscellaneous: www.everythingismiscellaneous.com This video is licensed under a Creative Commons Attribution-Noncommercial-Share Alike 3.0 License. So you are welcome to download it, share it, even change it, just as long as you give me some credit and you don’t sell it or use it to sell anything.
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