Computerised Accounting : Qualitative Characteristics Of Accounting Information. Role Of Accounting ln Business

Computerised Accounting : Qualitative Characteristics Of Accounting Information. Role Of Accounting ln Business

Qualitative characteristics of accounting information refer to the attributes that make financial information useful and meaningful for decision-making purposes. These characteristics ensure that financial statements and reports provide relevant and reliable information to users. The qualitative characteristics are as follows:

Relevance: Information is considered relevant if it has the ability to influence the economic decisions of users. Relevant information is timely, predictive, and has confirmatory value. It helps users in assessing past, present, and future events and can be used to make informed decisions.

Reliability: Information is reliable if it is free from error and bias and can be depended upon by users. Reliability is achieved through the application of accounting principles, such as consistency, verifiability, and faithful representation. Reliable information enhances the credibility and trustworthiness of financial reports.

Comparability: Information should be presented in a way that allows users to compare it with other periods, entities, or industry benchmarks. Comparability enables users to identify trends, evaluate performance, and make meaningful comparisons for decision-making purposes.

Understandability: Financial information should be presented in a clear and concise manner, understandable to users who have a reasonable knowledge of business and economic activities. It should avoid unnecessary complexity or jargon, ensuring that users can interpret and comprehend the information easily.

Consistency: Consistency requires that accounting methods, principles, and practices are applied consistently over time. Consistency enhances comparability and enables users to identify trends, patterns, and changes in financial performance accurately.

The role of accounting in business is multifaceted and crucial. It serves the following key roles:

Recordkeeping: Accounting plays a fundamental role in recording and summarizing financial transactions and events. It ensures systematic and accurate documentation of business activities, providing a reliable record of the organization's financial position, performance, and cash flows.

Financial Reporting: Accounting generates financial reports, such as balance sheets, income statements, and cash flow statements. These reports communicate the financial performance and position of the business to stakeholders, including investors, creditors, regulators, and management. Financial reporting helps stakeholders make informed decisions and assess the viability and profitability of the business.

Decision Making: Accounting information provides data and analysis that assist in making informed business decisions. It helps management evaluate the financial implications of different alternatives, assess profitability, manage costs, and allocate resources effectively. Accounting information also aids external users, such as investors and creditors, in evaluating the financial health and potential risks of investing or lending to a business.

Planning and Control: Accounting helps in the planning and control of business operations. Budgeting and forecasting techniques utilize accounting data to set financial goals, allocate resources, and monitor performance. By comparing actual results with planned targets, accounting facilitates performance evaluation, identifies areas for improvement, and supports decision-making for achieving organizational objectives.

Compliance and Legal Requirements: Accounting ensures compliance with legal and regulatory requirements. It involves maintaining proper books of accounts, adhering to accounting standards, and fulfilling tax obligations. Accurate and timely financial reporting assists in meeting legal obligations and avoiding penalties or legal disputes.