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The Concepts of Accounting and Qualities of Accounting Information

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THE CONCEPTS OF ACCOUNTING AND QUALITIES OF ACCOUNTING INFORMATION

A) Accounting is the process of identifying, recording, classifying, summarizing and evaluating information’s that can be measured in monetary terms for accurate communication of these economic events through proper presentation and interpretation for users of the information to make a favorable decision. However for accounting to achieve its objective, than the carried information should have certain qualities and six of them are explained with example below; 1. Accounting information must be relevant.
The information must be essential to users to predict future possible outcomes. Relevant information should inform the users the financial performance of the entity to make accurate decisions. However, if the information limits users to know the financial performance of the entity to for tile future happening than the information has failed it relevant. For example if net income and its associates confirm investors predictive about future cash generation ability then the net income has feedback value for investors making it a relevant information. 2. Accounting information must be reliable.
A quality business decision making is positively related to reliability of accounting information. The information can be reliable if it is verifiable and is natural. Verifiable means the information should prove be-young doubt by showing clearly income and expenses posted to the accounting general ledges for accurate outcomes. The information should also be recorded as it is without any manipulations to create a different picture but must be of it natural or original state to ensure reliability. For example if ANADOS Company Limited gains loss with its natural information it should be presented to the uses as such without making it as profit. 3. Accounting information should be...

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