Characteristics of Accounting Information System
The objective of accounting is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to wide range of users in making economic decisions. To be useful the accounting information must possess the characteristic of reliability, relevance, understand-ability and comparability.
Reliability: Information is said to be reliable if it is free from error and bias and faithfully represents what it seeks to represent. Information must be believed and depended upon by the users for a given purpose. To ensure that information is reliable, it must be verifiable, neutral and faithful in representing the economic condition.
Relevance: Information is said to be relevant if it influences the decisions. To be relevant, information must be available in time, must help in prediction, and help in feedback.
Understandability: The accounting information must possess the quality of economic significance to the user, i.e. to understand the content and significance of financial statements and reports. The qualities that distinguish between good and bad communication in a message are fundamental to the understandability of the message. A message is said to be communicated when it is interpreted by the receiver of the message in the same sense in which the sender has sent.
Comparability: The quality of information that enables users to identify changes in the economic phenomena over a period of time, between two or more entities. Accounting reports should be comparable across the firms to identify similarities and differences. To be comparable, accounting reports must belong to a period, use common unit of measurement and common format of reporting.
- Types of Accounting Information
Accounting has been the primary source of generating information about the day to day working and future planning of the organization.