Question

After reading chapter 2, identify which specific qualitative characteristic of accounting information is best described in each item below (for example relevance, representational faithfulness, comparability, etc.).

1.      Financial information should make a difference in a user’s decision making.

2.      Financial information should be available to users before it loses its ability to be useful for making a decision.

3.      Knowledgeable, independent users should be able to achieve similar results and consensus when accounting for a particular financial transaction.

4.      Complex Corporation provides overly complicated descriptions and explanations in its statement notes and provides only aggregated totals on the face of its financial statements. Which qualitative characteristic of accounting information is not followed?

5.      The CFO of WebMedia stresses that factual, truthful, unbiased information is the overriding consideration when preparing WebMedia's financial information.

6.      Base Line Inc. realizes that financial information may be misrepresented or misinterpreted if all pertinent information is not included.

7.      Wrong Turn Industries exercises due care and professional judgment in developing all estimates and assumptions used to prepare its financial information.

Answer 1

Answer 1 Relevance

Answer 2 Timeliness

Answer 3 Verifiability

Answer 4   Understandability : Financial information should be of sufficient quality and clarity to permit reasonably informed users to assess the information’s significance. Then only Understand each and every item

Answer 5 Freedom from omission or error : Financial information must be reliable and without errors or omissions. The it become Truthful and ubaised when it is free from errors

Answer 6 Representational faithfulness :  Financial information should reflect the economic substance of business events or transactions.

Answer 7 Completeness :  Financial statements should include all information necessary to portray the underlying transactions.