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 fill : The blanks using qualities 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 fill: The blanks using qualities 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

The contribution margin ratio is calculated as how? a) Gross margin divided by sales b) Operating income divided by sales c) Contribution margin divided by sales d) Net income divided by sales

Answer. General Account

Colfax Company incurred production labor costs of $5,400 in February (payable In March) for work requiring 1,100 standard hours at a standard rate of $15 per hour; 1,200 actual direct labor hours were worked. Based on this information, which one of the following would be included in the journal entry to record the labor costs? a. $16,500 credit to Work-in-process Inventory. b. $1,500 credit to labor Efficiency Variance. c. $16,200 credit to Wages Payable. d. $1,500 credit to Labor Rate Variance.