Useful information : The financial information which is more relevant to make significant decisions for the investors and creditors is referred to as useful information. The useful information should have the following qualities according to Financial Accounting Standards Board (FASB): Fundamental qualities : Relevance : The relevant accounting information should have a predictive value and a confirmatory value. Predictive value means the accounting information should help the investors and creditors in predicting the future trends. Confirmatory value means the predicted accounting information comes to pass. All the financial items which could significantly influence the investors and creditors should be reported. This is the materiality concept of useful and relevant information. Faithful representation : This concept requires that the accounting information reported by a company should be complete , neutral (unbiased), and represented without any mathematical and material errors . Enhancing qualities : Comparability : All the accounting information reported by the companies should be comparable because the accounting principles used to prepare accounting information would be similar; and consistent because accounting methods and principles would not vary from year to year. Verifiability : The accounting information should provide similar results, if tested and examined by independent public accountants. Timeliness : As per the Securities Exchange Commission, companies should report the accounting information in the time it would influence the investors and creditors decisions, which is within 60 days of the accounting period of the company. Understandability : The accounting information should be concise, precise, interpretable, and able to comprehend. To complete : The statements with the qualitative characteristics of accounting information

Question

Want to see the full answer?

Answer 1

Question

Chapter 2, Problem 2.8BE

To determine

Useful information: The financial information which is more relevant to make significant decisions for the investors and creditors is referred to as useful information. The useful information should have the following qualities according to Financial Accounting Standards Board (FASB):

Fundamental qualities:

Relevance: The relevant accounting information should have a predictive value and a confirmatory value. Predictive value means the accounting information should help the investors and creditors in predicting the future trends. Confirmatory value means the predicted accounting information comes to pass. All the financial items which could significantly influence the investors and creditors should be reported. This is the materiality concept of useful and relevant information.

Faithful representation: This concept requires that the accounting information reported by a company should be complete, neutral (unbiased), and represented without any mathematical and material errors.

Enhancing qualities:

Comparability: All the accounting information reported by the companies should be comparable because the accounting principles used to prepare accounting information would be similar; and consistent because accounting methods and principles would not vary from year to year.

Verifiability: The accounting information should provide similar results, if tested and examined by independent public accountants.

Timeliness: As per the Securities Exchange Commission, companies should report the accounting information in the time it would influence the investors and creditors decisions, which is within 60 days of the accounting period of the company.

Understandability: The accounting information should be concise, precise, interpretable, and able to comprehend.

To complete: The statements with the qualitative characteristics of accounting information

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Whats a good response and question to ask to this post? The county that I am choosing to expand to is Denmark. Below is a brief overview of their political, economic, and legal systems. Political System Denmark is a Constitutional Monarchy. Their chief of state is the Queen and their head of government is the Prime Minister. The government is broken up into three branches, the executive branch, judicial branch, and legislative branch. Economic System Denmark is a developed country with a high income. Not much is able to sway Denmark. Unlike most countries, when Covid was wreaking havoc all over the world, their economy recessed by only 2% in 2020 and continued on to jump back up by 3.8% by 2022. They also have a very low unemployment rate of only 2.7%. Legal System Denmark operates by a civil law system with roots in Germanic Law. They have a medium corruption score of 88 out of 200. Denmark has a great business perspective overall. The only part that I would question is, how would the…

Problem 3-2B Preparing adjusting and subsequent journal entries P1 P2 P3 P4 Natsu Company's annual accounting period ends on October 31. The following information concerns the adjusting entries that need to be recorded as of that date. Entries can draw from the following partial chart of accounts: Cash; Accounts Receivable; Office Supplies; Prepaid Insurance; Building; Accumulated Depreciation- Building; Salaries Payable; Unearned Revenue; Rent Revenue; Salaries Expense; Office Supplies Expense; Insurance Expense; and Depreciation Expense-Building. a. b. c. d. e. f. The Office Supplies account started the fiscal year with a $600 balance. During the fiscal year, the company purchased supplies for $4,570, which was added to the Office Supplies account. The supplies available at October 31 totaled $800. The Prepaid Insurance account had a $12,000 debit balance at October 31 before adjusting for the costs of any expired coverage for the fiscal year. An analysis of prepaid insurance shows…

Problem 3-1B Identifying adjusting entries with explanations P1 P2 P3 P4 For journal entries 1 through 12, indicate the explanation that most closely describes it. You can use explanations more than once. A. To record payment of a prepaid expense. B. To record this period's use of a prepaid expense. C. To record this period's depreciation expense. D. To record receipt of unearned revenue. E. To record this period's earning of prior unearned revenue. F. To record an accrued expense. G. To record payment of an accrued expense. H. To record an accrued revenue. I. To record receipt of accrued revenue. 1. Interest Receivable 3,500 7. Cash 1,500 Interest Revenue 3,500 Accounts Receivable (from services) 1,500 2. Salaries Payable 9,000 8. Salaries Expense 7,000 Cash 9,000 Salaries Payable 7,000 3. Depreciation Expense 8,000 9. Cash 1,000 Accumulated Depreciation. 8,000 Interest Receivable 1,000 4. Cash 9,000 10. Unearned Revenue 9,000 Prepaid Rent Cash 3,000 3,000 5. Insurance Expense 4,000…