Question

Why is reliability an important characteristic of accounting? What factors constitute reliable information or information sources?

Answer 1

Reliability of Accounting Information is one of the important characteristic of Accounting . Reliability refers the trustworthiness of financial records and all the statement that maintained by the company.

In other words, Reliability refers that all the accounting information that present accuracy, complete information about the company. Reliability is necessary for all the stakeholders because all the stakeholders are depend on the information that is provided by the company and help in decision making. So, the reliability of information becomes a very important part of the company.

There are various factors constitute reliable information

1. Verifiability of information

Financial records are verificable by various measure to come up with desire results. Internal and external auditors plays a very important role. Auditors and other third party take measures to evaluate all the financial statement of the company. So, it is necessary for the compamy to take steps towads appropriate measures time to time for the reliabilty of the information.

2. Neutrality of information

To maintain neutrality of information, company is required to maintain unbiased information while records financial statement. All the information provided by the company must be free fron errors beacause information provided by the company affects the decision making of the stakeholders. So it is neccessary to be neutral.

3. Faithfulness

Company maintain goodwill in the market because of its trustworthiness and Faithfulness. So, it is neccessary for the company to represent what actually happened not the wrong information. So the company must show information in the financial statement that is accurate.

All these facors constitute reliable information