Qualitative Characteristics of financial statements
Qualitative Characteristics of financial statements
Are as follows:-
1.
Understandability: The information in the financial statements
must be easily understandable.
2.
Relevance:
-Information
must be relevant for decision making need of users.
-they must be
able to evaluate past, present and future events.
3. Reliability: -Information must be reliable to be useful for the need of users. it should be free from errors and bias . user can depend upon it and can take their decisions.
5. Materiality :- Relevance of information is affected by its materiality.
6. Faithful Representation:- Information must be presented faithfully. The transaction and events to be reliable for user.
7. Substance over form :- the transactions and other events in financial statement should be accounted and presented in accordance with their substance and economic reality and not merely their legal form. For example, assets taken on lease are shown as an asset in balance sheet, even firm is not a legal owner.
8. Neutrality :-Information contained in financial statement must be that , it is free from bias.
9. Prudence:- Prudence means degree of
caution in exercise of judgments requires to estimate condition of uncertainty
so that assets and income are not overstated and liabilities and expenses are
not understated.
10. Full, Fair and adequate Disclosure :-The disclosure should be full and final to assess financial position of enterprises. Principle of full disclosure implies nothing should be omitted. Principle of fair disclosure implies all transaction recorded in financial statement present true and fair view result of business. Adequate disclosure implies that information influencing the decision of users should be disclosed in details and should make sense.
11. Completeness :-- Information in financial statement must be complete. An omission may cause false or misleading and unreliable information.
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#QualitativeCharacteristicsoffinancialStatements
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