Accounting
information is the compilation of a company’s financial transactions. Companies
present accounting information to internal and external business stakeholders
for making decisions. Most companies must present accounting information
according to national accounting standards; in the United States, generally
accepted accounting principles (GAAP) represent the most authoritative
accounting standards. GAAP requires accounting information to include
qualitative characteristics on which business stakeholders can rely.
Reliability
Reliable accounting information is
free from bias or opinion from business owners, managers or professional
accountants. Business stakeholders need reliable information so they have
assurance that all information is accurate and valid. Business owners can
manipulate accounting information to present a more positive picture of the
company’s financial health. The absence of reliability may lead business
stakeholders to make decisions that limit or prohibit financial returns.
Relevancy
Accounting information is relevant
when it contains timely information. Business stakeholders cannot make solid
decisions using old information. Many companies use calendar months as their
accounting periods to record financial transactions. Relevant information
includes transactions only included in specific accounting periods. This allows
business stakeholders to develop a trend analysis to review the company’s
accounting information.
Consistency
Consistency ensures that accounting
information is prepared the same way each month or accounting period.
Accounting policies and procedures often help companies present their
accounting information in a consistent manner. Publicly held companies often
disclose their accounting policies and procedures in their quarterly or annual
report. This information helps business stakeholders understand the accounting
system in place and how the company maintains consistency.
Comparability
Comparability is the ability to
compare one company’s accounting information to another company’s information.
This characteristic can relate to the presentation of a company’s accounting
information on financial statements and reports. While companies can use
different accounting methods to record their information, business stakeholders
must be able to compare the information. Assets, liabilities and other
information is often listed in the same format for a comparative analysis.
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