ACCOUNTING AS AN INFORMATION SYSTEM
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There are no easy answers to the problem of weighing costs and benefits. Although it is
possible to apply some ‘science’ to the problem, a lot of subjective judgement is normally
involved.
The
qualities,
or characteristics, influencing the usefulness
of accounting information,
which have been discussed above, are summarised in Figure 1.3.
Figure 1.3
The qualities that influence the usefulness of accounting information
COST
CONSTRAINT
Fundamental
Relevance
Qualities
Enhancing
Faithful
representation
Predictive
value
Confirmatory
value
Comparability
Timeliness
Verifiability
Understand-
ability
Completeness
Materiality
threshold
Neutrality
Freedom
from error
There are two fundamental qualities that determine the usefulness of accounting information. In
addition, there are four qualities that enhance the usefulness of accounting information.
The
benefits of providing the information, however, should outweigh the costs.
ACCOUNTING AS AN INFORMATION SYSTEM
We have already seen that accounting can be seen as the provision of a service to ‘clients’.
Another way of viewing accounting is as a part of the business’s total information system.
Users, both inside and outside the business, have to make decisions concerning the alloca-
tion of scarce resources. To ensure that these resources are efficiently allocated, users often
need financial information on which to base decisions. It is the role of the accounting system
to provide this information.
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