QUALITIES OF ACCOUNTING INFORMATION

Qualities of Accounting Information

The following are the desirable qualities of Accounting Information to make it useful for its users. Accordingly these should be kept in mind while preparing Financial Statements.

RELEVANCE

It is primary Qualitative Objective.
It must be relevant for the users to evaluate the financial performance of the business, so that they may draw correct conclusions and make correct decisions.
If it is not relevant, it is useless.
To improve the relevance means to increase the usefulness of the accounting information.

UNDERSTANDABILITY

Financial information will be useful if it is expressed in terminology and in such a form that is understandable to the user.

RELIABILITY / VERIFIABILITY

Financial information should be of a standard that can be relied upon by external users, so that it is free from errors and can be depended upon by users in their decision making.

COMPLETENESS

It is also referred to as “Full Disclosure”.
Accounting Statements should show all aspects of the business.
All the financial accounting data, meeting the above qualitative objectives, should be reported.

LACK OF BIAS / NEUTRALITY

Financial Statements should not be biased in favor of one group of users to the detriment of another.

TIMELINESS

Accounting Statements should be published as soon as possible, after the close of the fiscal year. Other statements, as per law, even during the year should also be provided in the prescribed time.
Information furnished after a decision has been made is of no value.

COMPARABILITY

Accounting information should be comparable with that of other similar enterprises and from one period to the next.