Qualities/Limitations of Accounting Information

Topic Content:

Qualities/Characteristics of Accounting Information:

The primary objective of financial reporting is to provide useful information for making business decisions. A piece of good accounting information must have the following qualities in order to satisfy the user’s needs:

1. Reliable: Reliable information should be free from error and bias and faithfully represent what it is meant to represent.

2. Verifiable: If independent observers, using the same methods, obtain similar results, then the information is verifiable

3. Timeliness: For accounting information to be relevant, it must be timely, i.e. it must be available to the decision-makers before it loses its capacity to appropriately inform decisions.

4. Relevance: Accounting