| Business accounting is the art of analyzing the | | | | Accuracy is known when all the numbers check |
| financial position and operating results of a | | | | out. Accuracy is high when each part of an |
| business from a study of its sales, purchases, | | | | equation confirms that the answer is correct and |
| overhead, etc. In other words, each department | | | | it represents the company's resources. |
| of a business gathers the results of their | | | | Neutrality means not worrying about the outcome |
| processes to understand how the company is | | | | of the calculations, but concentrating on the |
| doing financially and how to improve those figures. | | | | information being reliable and relevant. |
| Contrary to popular belief, accounting in business | | | | Comparability, which includes consistency, is the |
| is not a science, but an art-form. It is not always | | | | third quality that interacts with relevance and |
| black and white, adding and subtracting. There are | | | | reliability to contribute to the usefulness of |
| decisions to be made according to preferences of | | | | business accounting as well. |
| the business operations. Relevance and Reliability | | | | Comparability looks at the similarities and |
| are the 2 main reasons why accounting is so | | | | differences of two different companies, markets, |
| important for decision makers of a business. | | | | or time periods. Information about a particular |
| Relevance in accounting pertains to how useful a | | | | enterprise is very useful when compared with |
| bit of information is to a company. The potential | | | | similar information about other enterprises. It can |
| uses will depend on the type of company and | | | | also be useful to one business for comparison of |
| each company may be looking to learn something | | | | different time periods. Comparability between |
| different. Accounting information that is relevant | | | | enterprises and consistency in the application of |
| has a predictive value that helps the business | | | | methods over time increases the informational |
| make sound predictions about the future direction | | | | value of comparisons of economic opportunities. |
| of the market and their company. The | | | | Studying these business accounting principles and |
| information can give valuable feedback as well by | | | | qualities can prove to be very valuable for an |
| confirming theories and examining why events | | | | enterprise. But an extensive study is required to |
| took place. | | | | effectively use these principles. |
| Timeliness is an aspect of relevance, which deals | | | | Because of the importance and the intricacy of |
| with having information available to decision | | | | these operations, most businesses do not want to |
| makers when that information still has significance | | | | take the time to learn these calculations |
| to sway the decision. Reliability is determined by | | | | themselves. This is when it is wise for a company |
| how verifiable and accurate the accounting | | | | to invest in accounting software. |
| measurement is in the business. The neutrality of | | | | At the end of the day business accounting can |
| information also plays a role in how useful | | | | greatly assist owners to make decisions. If the |
| accounting figures are for determining reliability. | | | | business accounting is done well, the results of |
| Verifiability is a type of double checking the | | | | decisions are more profitable. But, if it is done |
| accuracy of calculations. Multiple people or groups | | | | poorly, making decisions from that information |
| will use the same method of calculation and agree | | | | may ruin the company. |
| that the measurement originally taken is correct. | | | | |