The 8 Qualities of Good Accounting Information

July 31, 2024 Globalinfo247

The release of accounting information is not a guarantee that such report is correct. There are basic tests to which any accounting report could be subjected. These tests are the qualities expected to be displayed in any good accounting information, and these are:

1. Relevance

Good accounting information should be relevant to the purpose for which it is prepared. It should include enough facts and figures to satisfy the need of the users. Without this, the information is like an ordinary plain piece of paper.

2. Objectivity

Accounting information should be free from thoughts and feelings of the person preparing the report. Ability to trace all accounting transactions in a report to the source documents is important for objectivity to be realized.

Objectivity also require that bias and window dressing should not be introduced and the information provided must comply with relevant principles and regulations governing the preparation of financial statements.

3. Completeness

The report should be complete enough to give the user full information with which decision could be reached. Enough information or details for good understanding of the user is important for accounting information to be complete.

4. Timeliness

Accounting information should be on time. It should be ready as at when needed. If not, it will be a useless effort preparing the report.

The accounting information requires by company’s management on daily, weekly or monthly basis for effective running of the organization must be provided as at that period. If it comes late it would be useless.

5. Comparable

Comparing accounting report for one period to another should be possible with ease. It means that the report should be prepared in a way that allows for quick and easy comparability from one period to another.

It means that the basis for the preparation of the accounting information from period to period must not change. If for any reason a change occurs, it must be clearly stated with the effect of such change.

6. Clarity

The information provided should be clear enough for the user to understand to the extent that the user will not need a third party to interpret it to him.

7. Accuracy

The report should be exactly right and free from all forms of errors, mistakes, and omissions.

8. Flexible

Flexibility means that accounting reports should be easy to change, adjust and adaptable to suit different kinds of users.

In summary, accounting includes the collection, recording, presenting, analyzing and interpreting financial information for the users of financial statements.

It involves accurate book- keeping, records, measuring and interpreting the financial results of the business by the preparation of accounting ratios and communicating these results to management and other interested parties or users.

Accounting has the nature of profession, science, language, service activity and information systems. The branches of accounting include financial accounting, cost accounting, auditing, public sector accounting and managerial accounting.