Explain the qualitative characteristics of Accounting Information.
The qualitative characteristics of accounting information are as follows:-
- Reliability-The first qualitative characteristic of accounting information is reliability. Reliability means the users must be able to depend on the information. It is believed that reliable information should be free from error and bias and faithfully represents what it is meant to represent.
- Relevance-The second qualitative characteristic of accounting information is relevance. It is believed that relevant, information must be available in time, must help in prediction and feedback and must influence the decisions of users in a positive manner.
- Understandability- Understandability is the third most important qualitative characteristic of accounting information. Understandability means decision-makers must interpret accounting information in the same sense as it is prepared and conveyed to them.
- Comparability-The last qualitative characteristic of accounting information is comparability. It is believed that it is not sufficient that the financial information is relevant and reliable at a particular time, in a particular circumstance or for a particular reporting entity.