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Chapter 2: Question 3Q (page 61)

What is meant by term 鈥渜ualitative characteristics of accounting information鈥�?

Short Answer

Expert verified

The term 鈥渜ualitative characteristics of accounting information鈥� refers to the attributes that make the information contained infinancial statements beneficial to the users. The qualitative characteristics of accounting information include relevance, reliability, understandability, and comparability.

Step by step solution

01

Definition of “qualitative characteristics of accounting information”.

Qualitative characteristics of accounting information are the qualities that allow the users of financial information to comprehend and make decisions on financial reports more easily.

In the absence of these qualitative characteristics, the accounting information would be vague and not presented in an orderly manner.

02

Types of “qualitative characteristics of accounting information”

There are basically four types of qualitative characteristics of accounting information. They are:

  • Relevance: The term relevance here means that the relevant information must be timely predictable, assist users in providing feedback, and positively influence their decisions.
  • Reliability: The term reliability means that the users must be able to rely on the information provided to them. For this purpose, the information provided to them must be free from any bias, and it should also be accurate.
  • Understandability: Understandability in accounting information means that the users must be able to comprehend the information in the same manner as it is conveyed to them.
  • Comparability: The term comparability here mean that accounting information must be comparable. The users of the general-purpose reports must be able to compare different aspects of entities over different time periods and with other entities.

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