Characteristics Of Useful Accounting Information With Examples

Accounting information system is a transaction based informa tion system as it deals with the economic events taking place in the enterprise.

Characteristics of useful accounting information with examples. Finally relevance in accounting also means that it should be useful for the decision making process for the end users. Specially it is information s capacity to make a difference that identifies it as relevant to a decision. These characteristics describe what useful information is and how it relates to financial decision making. For information to be effective it should ensure that it is accurate reliable.

That is why the fasb created the qualitative characteristics of financial information. The demand for accounting information by investors lenders top banks in the usa according to the us federal deposit insurance corporation there were 6 799 fdic insured commercial banks in the usa as of february 2014. In order to be useful to a user accounting information should have the following characteristics. Qualitative characteristics are the tributes that make the information provided in financial statements useful to users.

4 qualitative characteristics of accounting information are. American accounting association s committee to prepare a statement of basic accounting theory defines relevance as the primary standard and requires that information must bear upon or be usefully associated with actions it is designed to facilitate or results desired to be produced. Characteristics of useful information. For example companies could report the current salary of the employees in an understandable and timely manner but this doesn t make this information relevant to an investor.

Qualitative characteristics of accounting information there are some qualities of accounting that make it useful for both external and internal users of accounting. Some of the important characteristics of useful information are discussed below. Information is encoded in several ways for safe communication between 2 parties. Comparability comparison is a very important.

Businessmen and women along with investors and credits should however clearly understand the information presented in the financial statements. False information may lead to wrong inappropriate actions. The accountant should record and report on accounting transactions from a neutral perspective without any bias that would give the reader an incorrect impression about the financial position results or cash flows of a business. What are the qualitative characteristics of accounting information.

The country s central bank is the federal reserve bank which came into existence after the passage of the. Accounting is the process of identifying measuring and communi cating economic information to permit informed judgments and decisions by users of the information. Without these qualities accounting information wouldn t be clear and an orderly view of the business would not be visible.