Qualitative Characteristics

In functional organizations, leaders and employees (main users) make decisions based on financial statements. These statements provide critical, up-to-date, and valuable information that allows users to reflect and make informed decisions. Generally, financial statements contain both quantitative and qualitative data. Besides figures, financial information must be financial information must be clear and error-free to enable the targeted users to make correct decisions.

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One of the key qualitative characteristics of financial information is reliability. Information accuracy is crucial in accounting and other activities involving finances because it guides budgeting, spending, and saving. Reliability of financial information implies representing data that does not mislead the users, is free from material error, and is unbiased (Birt et al., 2020). If differently stated, the reliability element of financial transactions denotes faithful representation of transactions. The information provides all the necessary transactions and underlying substance and provides the necessary estimates where needed through appropriate disclosure. Reliability means representing what financial information purports to represent through complete, neutral, and error-free data (Birt et al., 2020). Error-free and unbiased financial statements allow users to make consistent and informed decisions confidently. Qualitative Characteristics

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A suitable illustration of reliable financial information is an error-free balance sheet. It is a key document in financial accounting since it represents the book value of an organization. If the company’s liabilities are valued at $3,500,000, reliability implies providing the exact figure and including all the components of the liabilities. If the shareholder equity is $4,500,000 and the total assets’ value is $15,000,000, the figures should be represented accurately and all their underlying substance components included. Completeness, neutrality, and absence of errors should dominate all the other elements.

Qualitative Characteristics References

Birt, J., Chalmers, K., Maloney, S., Brooks, A., Oliver, J., & Bond, D. (2020). Accounting: Business report for decision making. John Wiley & Sons.