Qualitative Characteristic

What is Qualitative Characteristic?

Qualitative Characteristic are attributes that makes the accounting information useful to users. Therefore, the Qualitative Characteristic are:-

1) Reliability:

Reliability is depict as one of the two essential characteristics that settle on bookkeeping data helpful for basic leadership. Anyway solid data is require to frame decisions about the gaining potential and monetary situation of a business firm. Thus, dependability varies from thing to thing. A few things of data displayed in a yearly report might be more dependable than others.

2) Relevance:

Relevance refers to how accommodating the data is for monetary basic leadership forms. Moreover, for accounting information to be relevant, it must possess:

  1. Confirmatory value:  Provides information about past events.
  2. Predictive value: Gives prescient power with respect to conceivable future occasions.

Therefore, accounting information is relevant if it can provide helpful information about past events and help in predicting future events or in taking action to deal with possible future events. For instance, a company experiencing a strong quarter and presenting these improved results to creditors is relevant to the creditors decision-making process to extend or enlarge credit available to the company.

3) Understandability:

Understandability is the nature of data that empowers clients to see its essentialness. In this way the advantages of data might be expanded by making it increasingly reasonable and thus helpful to a more extensive hover of clients. Introduction of data ought encourage understanding as well as maintain a strategic distance from wrong elucidation of budget summaries.

4) Comparability:

The presentation of accounting information ought to be basic and reasonable for the clients of the data. Therefore it is important that all the data is clear and short. So, it can be easily understood by everyone including parties who are not from the accounting background.

All pertinent logical notes ought to be given along the fiscal reports. Qualitative Characteristic consequently method of valuation of inventory, method of depreciation, information on reserves and surplus, contingent liabilities, and any other extraordinary items.

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