For accounting information to be useful, it must have specific characteristics and meet the Financial Reporting Standards (FRS). Unless your business’s accounting information has the following characteristics, an auditor can’t certify your its records.
Relevance is important for any information to be predictive and feedback value. For it to offer feedback value, the accounting information should shed a bright light on the business performance (from income statement) and financial position (from balance sheet). With that, the management can utilize it in decision making and forecasting.
Note that timeliness is a subset of relevance. This implies that if you don’t present the accounting information in right time, its usefulness to the management and investors diminishes. In this case, timeliness means recording every transaction in the accounting period and preparing the financial reports at the end of every accounting period.
Such information is crucial when it comes to decisions regarding your business operations and growth. Therefore, you must ensure that the accounting details are verifiable – you can ascertain that the information is authentic and trace every expense and income entry in your general ledger. Besides, reliable accounting information must be prepared according to the Financial Reporting Standards and principles: the information wasn’t recorded with the aim of manipulating the business’s financial position.
You are required to be consistent in applying the accounting procedures, principles, and practices. For example, if you have been using FIFO (First In First Out) method of monitoring cost flow, the users of that accounting information expect your financial information to be recorded according to FIFO and not LIFO (Last In First Out). If you change this practice and start using LIFO, then this change must be disclosed effectively.
Depending on the size of your business, changing the inventory tracking method affects the consistency of the accounting data. Therefore, you should minimize such changes, if it’s necessary to make such changes, consider implementing them at the beginning of a new accounting period.
For you to be able to compare accounting information in different accounting periods, then, the information must be consistent. Accounting data comparison is important in decision making and forecasting processes as it sheds light to the progress of business.
When recording the accounts and preparing the necessary accounting information reports, whether in-house or using an accounting service in Singapore, you must make sure that the accounting information has these characteristics for it to be useful. This is important if you want your business financial reports to meet the FRS.