Qualitative Characteristics of Accounting Information

Qualitative Characteristics are the attributes that make the information provided in financial statements useful to users. The four main qualitative characteristics are;

1. Reliability

      2. Relevance

3. Understandability
4. Comparability

Users of Accounting Information

Distinction between Financial Accounting, and Cost and Management Accounting

Evolution of Accounting

The origin of accounting as a social study can be traced back to every ancient days. It is as old as the beginning of the use of money itself.

Even under the barter system, some primitive form of accounting existed. Till the 13^th century, the mode of keeping accounts was primitive. A French merchant wrote in his book: ‘Lent 10 gold coins to a man last year. In Europe, calculations were made largely in Roman numerals and sum were very often wrong.

System of accounting developed in the 15^th century and its genesis can be traced to Double Entry bookkeeping which is said to be fashioned by Fra Luca Pacioli (about 1445-1520), he was multi-talented mathematician and philosopher of Venice.

Double Entry System remained ignored in Europe, people continued following what is called Stewardship Accounting, the method of keeping accounts of household expenses followed by stewards.

With the advent of joint stock companies, ownership was separated from the management, the idea of bookkeeping using double entry system recognized.

The need was statutorily recognized, and there emerged as an information system for the investors and other such statements as Balance Sheet, Profit and Loss Account, etc.

What is Book-keeping?

Book-keeping is an activity concerned with the recording of financial data in a significant and orderly manner.

Book-keeping and an Accounting

The terms book-keeping and accounting are often use synonymously. It is recording phase.

    It is the recording phase of accounting system.

    It is the basis of accounting

   Persons responsible for bookkeeping are called book-keepers.

    It does not require any special skills or knowledge.

    Persona judgement of the book-keeper is not required.

    Financial statements are not preparing form bookkeeping records.

    It does not give the complete picture of the financial condition of the business unit.

    It does not help in complying legal formalities.

    It does not provide any information for taking managerial decisions.

    It has no branch.

Introduction to Accounting

What is an Accounting?

Accounting is an art of recording, classifying, summarising and reporting of business transaction with an object of showing financial health of company. In other sense, accounting has been referred to as ‘’the language of business’’.

It is summarising phase of an accounting system.

It is basis for business language.

Person responsible for accounting are called accountants.

It requires special skill and knowledge.

Personal judgement of the accountant is essentials.

Financial statement is prepared from accounting records.

It gives the complete picture of the financial condition of the business unit.

Legal formalities can be compiled with the help of accounting.

It provides information for taking managerial decisions.

It has several branches e.g, financial accounting, cost accounting, management accoutring

Accounting is the analysis and interpretation of book-keeping records. It is summarising phase of an accounting system.