The characteristic of accounting information that requires financial reports to be expressed as clearly as possible and to be capable of being understood by those they are addressed to, is known as:
A) relevance.
B) understandability.
C) reliability.
D) cost versus benefit test.

Question

Quizplus · Accepted Answer

The characteristic being described is understandability, which refers to the quality of financial reports being expressed in clear language and terms that can be easily understood by their intended audience. This is an important aspect of accounting information, since users of financial reports who do not have specialized knowledge in accounting or finance need to be able to understand the information in order to make informed decisions. Relevance and reliability are also important characteristics of accounting information, but neither of them specifically addresses the importance of understandability. The cost versus benefit test is a decision-making tool used to evaluate whether a particular action or investment is worthwhile, and is not a characteristic of accounting information.

The Characteristic of Accounting Information That Requires Financial Reports to Be