Learning Materials
Features
Discover
Chapter 2: Question 4Q (page 61)
Briefly describe the two fundamental qualities of useful accounting information.
The two fundamental qualities of useful accounting information are relevance and accuracy.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
What are some of the challenges to the IASB in developing a conceptual framework?
Expenses, losses, and distributions to owners are all decreases in net assets. What are the distinctions among them?
Accounting information provides useful information about business transactions and events. Those who provide and use financial reports must often select and evaluate accounting alternatives. The FASB statement on qualitative characteristics of accounting information examines the characteristics of accounting information that make it useful for decision-making. It also points out that various limitations inherent in the measurement and reporting process may necessitate trade-offs or sacrifices among the characteristics of useful information.
Instructions
a) Describe briefly the following characteristics of useful accounting information.
1. Relevance (4) Comparability
2. Faithful representation (5) Consistency
3. Understandability
b)For each of the following pairs of information characteristics, give an example of a situation in which one of the characteristics may be sacrificed in return for a gain in the other.
1. Relevance and faithful representation.
2. Relevance and consistency.
3. Comparability and consistency.
4. Relevance and understandability.
c) What criterion should be used to evaluate trade-offs between information characteristics?
What is meant by term “qualitative characteristics of accounting information”?
CA2-7 (Expense Recognition Principle) Accountants try to prepare income statements that are as accurate as possible. A basic requirement in preparing accurate income statements is to record costs and revenues properly. Proper recognition of costs and revenues requires that costs resulting from typical business operations be recognized in the period in which they expired.
Instructions
(a) List three criteria that can be used to determine whether such costs should appear as charges in the income statement for the current period
.(b) As generally presented in financial statements, the following items or procedures have been criticized as improperly recognizing costs. Briefly discuss each Item from the viewpoint of matching costs with revenues and suggest corrective or alternative means of presenting the financial information.
(1) Receiving and handling costs.
(2) Cash discounts on purchases.
What do you think about this solution?
We value your feedback to improve our textbook solutions.
Explanations 
Textbooks 
Exams 
GCSE 
IGCSE 
AS 
A Level 
International A Level 
University Admissions Tests 
Flashcards 
Vaia AI 
Notes 
Study Plans 
Study Sets 
Find a job 
Find a degree 
Student Deals 
Magazine 
Mobile App