Contents
Meaning of Accounting Information
Accounting information is the collective data of business transactions. It provides the data for analysis to different users for their further decision-making. These users can be the owner of the business, employees, investors, and government. Users of Accounting Information may be categorized into Internal Users and External Users.
Qualitative Characteristics of Accounting Information
Comparability
Comparability means that the accounting information can be compared with inter-firm comparison(other firms) or within the intra-firm comparison(our own firm) of a certain period of time.
The comparison helps in analyzing, interpreting, and decision-making.
Example of Comparability: Compare our firm yearly progress with the competitor’s firm. or Compare current year profit with the last year profit.
Reliability
Accounting information is very reliable for this auditor, audit the account from time to time. the information is free from any error and manipulation and can be used by the users.
Example of Reliability: Auditor verifies all transactions with the help of invoices, cash memos, etc so the information can be used to raise the fund form investors.
Relevance
The relevance of accounting information means it must relevant for the user with their decision-making process. The information must be relevant to every user for their analysis process.
Example of Relevance: For the investor to know assets and the liability of the business is important to invest their money in the company.
Understandability
The information in the accounting Statement must be prepared in such a way so the user can understand the information easily. The data must be presented in neat and clean so even a layman can understand the information.
Example of Understandability: Most of the investor are not aware of accounting. If the information presented in a good manner so they can also understand and make their investment decision.