We explain what accounting information is and what it is for. Also, what are the main characteristics of this information.
What is accounting information?
Accounting information plays a key role, since it allows to identify, record, measure, classify, analyze and evaluate in a systematic and orderly manner all the operations or activities carried out in an organization . It is necessary for those who run the company and also for all those who in some way interact with the company from outside it.
On the other hand, it is a legal requirement to have all the commercial data , in order to present them if they are requested by a competent authority (for example, for a tax inspection). In addition to the management itself or the board of directors itself, the users of the accounting information can be unions, suppliers, investors, supervisory bodies, creditors, banks, etc.
Characteristics of accounting information :
Knowing the financial statements can be a valuable element for decision making.
The accounting information must be useful, in principle, to know the real financial situation of a business . Knowing the financial statements can be a valuable element for decision making. To be useful, accounting information must meet the requirements listed below.
Accounting information must be consistent with the objectives and needs of those who will use it.
The accounting information must be easy to understand, it must be written in a clear and organized manner , without too many technicalities, to be accessible even to people who are not experts in accounting matters.
The information must have the possibility of being compared with that of other companies or with that of the same company in other periods of time.
Sometimes special meetings are held to publicize accounting information.
The information must be provided in a timely manner , as well as in an appropriate place; sometimes special meetings are held to disclose accounting information, for example, to a company’s board.
Accounting information must be prepared without any type of prejudice or preconception , it is simply necessary to refer to the facts as they are. It is not ethical to “draw” a different picture from the real one to influence the users of that information in a certain direction.
The information must allow users to depend on it when making their decisions , that is, it must be reliable information, for which it is necessary that it also meets the requirements of verifiability and representativeness.
- Verifiability. The information must be able to be corroborated by people other than those who supplied it.
- Representativeness. The information must see the whole, not a specific part, because that could lead to an unrealistic idea of the accounting situation. The more precise, the more representative it will be.
The accounting information must represent everything reliably.
There must be security regarding the data that is provided, absolutely everything must be checked , never relying solely on what another communicates, since there may be involuntary errors.
Uncertainties and risks must always be present when preparing an accounting report, so estimates must be very cautious. They are sources of uncertainty, for example, the collectability of doubtful accounts or the useful life of fixed assets.
The above content published at Collaborative Research Group is for informational and educational purposes only and has been developed by referring reliable sources and recommendations from experts. We do not have any contact with official entities nor do we intend to replace the information that they emit.