Identify four qualities that are pertinent to accounting measures

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Solution

Qualities pertinent to accounting measures are as follows

1) Relevance

An accounting measure is said to be relevant if it provides information that is useful for the users of the financial statements to make decisions. It is said to be relevant if it provides information about the events those occurred in the past and if it facilitates in forecasting the future events.

2) Reliability

An accounting measure is said to be reliable if it provides complete information prepared without error and bias. Reliable financials are highly desired by the users.

3) Understandability

Information presented in the statements and reports should be easily understood by the users. Users of the financials would prefer statements and reports those do not contain difficult and complex phrases and jargon.

4) Comparability

It helps the users to understand the performance trend of an entity over a particular period of time. It also helps in understanding whether there is consistency over the application of accounting policy from one accounting period to another. Also, it facilitates comparison of the entity's financial performance and position with the other entities.

ekkarill92 answered 1 year ago

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