Accounting involves the process of transforming data about an organisation's operations into information that various stakeholders can use for myriad reasons. However, accounting requires the production of good information according to specific standards. Good information possesses a significant number of ten characteristics.
1) Completeness
Good accounting information is complete. This means that it provides intended users with all the information that is necessary to fulfil their information needs and requirements. Completeness also suggests that all necessary information is included in any report that the organisation produces. The assumption is that there would be no error of omission in the information.
2) Relevance
There is always an objective to be fulfilled when accounting information is required. For accounting information to be valuable, it should be relevant to the objective and the intended user. An analysis of the prime cost of a project should not include information on indirect costs, for example. It is important that any figures or reports should stick to the point and not provide more information than is necessary. Irrelevant information wastes time and can increase the cost of information production.
3) Accuracy
It is almost self-evident that accounting information should be accurate. This does not suggest that you must always state figures and facts down to the last penny or detail. What it means is that information should be accurate enough for its intended purpose (or user), without being unnecessarily detailed. Inaccurate information cannot provide a valid representation of reality and can limit the effectiveness or worth of decisions based on it.
4) Clarity
It is useless to have accurate, timely and complete information if it is not clear to the user of the information. The ability of the user to understand and properly comprehend the information is critical. This is another reason why accounting standards are created and enforced.
5) Properly communicated
It is necessary for organisations to monitor activities and accounting information is useful in so doing. However, good information is properly communicated to those who need it. Accounting departments should not merely create required reports but communicate them to information users in manner that increases the value of the information.
6) Timely
Since information has an objective, there are usually periods within which these objectives operate. Good information neither is producedtoo frequently nor is it compiled after it is needed most. For instance, information that reaches a decision-maker after the decision is of limited use in the context of the decision-making process.
7) Confidence
A major reason why independent auditors audit some accounting information is to inspire confidence in the validity and worth of the information. This is a critical aspect of good accounting information, especially where critical decisions are taken based on such information. There must be confidence in the competence and integrity of those who produce accounting information.
8) Volume
Information overload can be a problem- particularly with the inherently limitations of the human mind. Accounting information needs to be distilled in a manner that makes it clear and concise and does not overwhelm the user. An unnecessarily high volume of information (although accurate and relevant) can do just that.
9) Cost-efficient
Valuable information should not cost more to produce than it is worth. This is the reason why information that is produced more regularly than required is less useful/ valuable than information that is produced to satisfy a specific need or requirement.
10) Communicated through the right channel
You can present and communicate accounting information in a number of ways. The most important factor is whether you communicate and distribute it through the appropriate channels. Since accounting information is created for certain users, you can judge the appropriateness of the communication channel by the effect on intended users. You can communicate some accounting information informally, while others require a very formal approach that strictly adheres to standards.
At any point in time, some characteristics may be more important than others are. Generally, good accounting information possesses all or most of the ten aforementioned qualities.
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