Understanding Quality of Accounting Information, Functions and Objectives

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Every company in Indonesia is required to make periodic financial reports that refer to local accounting standards. It is also an official source of information, thanks to these accounting reports. So that each report can provide quality information that is not only correct but also correct.

To make good business decisions, you need access to up-to-date financial information. If your company's financial reports are not very good, it can damage its reputation in the eyes of creditors and investors.

With financial reports containing very good quality accounting information, investors will find it easier to study financial reports to be able to find out the state of the company. An increase in the amount of money invested by investors occurs when the company's financial health is adequate.

Definition of Accounting Information Quality?

Quality accounting information also required to present or disseminate information to multiple stakeholders, as described above. Where this can be considered as the quality of an account in reporting.

Which reporting should be submitted systematically or sequentially? With the aim that investors and other stakeholders can enjoy the information system that has been outlined, in addition, this accounting information must be applied to each company's accounting reports.

What is Quality of Accounting Information

This study is actually carried out by the company, which will then be used as a standard. Investors and other interested parties must be able to see that the people using information systems are not just computer programmers.

Accounting is an art that has a vital function in terms of documenting and summarizing. In addition, this accounting also plays a role in the evaluation and reporting of relevant data.

In this situation, it is related to the transaction process that is generally carried out in the business area or company. So it is very important to display the quality of accounting information.

Any company's economic actions can be evaluated using accounting as a standard. Where the results of these economic operations also play a role in sending information to various parties. This party can be stated as an investor, creditor, management or regulator.

Characteristics of Accounting Information Quality

This characteristic is often used as support. The usefulness of the information provided will be affected by this assistance. This information must be included in each piece of data when making a selection. The criteria for the quality of accounting information are discussed in detail in the following paragraphs:

Relevant

The purpose of this quality feature of relevant accounting information is that the information can be used to influence the policies that will be used by companies to predict past, present, and future outcomes. It is because of this input that businesses are able to formulate long-term strategies.

Understandable

As one of the features of an accounting information system, this means that internal and external users can understand the accounting information collected.

Comparison between Benefits and Costs

The most important thing is that the cost of making accounting reports must be equal to the benefits obtained. It is important to remember that accounting reports should not be more expensive than the benefits they provide.

This implies that the costs are as low as possible, but the gains may be much more, if not many times.

Comparison between Benefits and Costs

Can be trusted

Reliable accounting information depends on 3 factors, namely:

  1. Verifiable Information must be verifiable by independent examiners using the same measurement method
  2. Neutral information must be directed to the general needs of users, and not depend on the needs and desires of certain parties.
  3. Presenting accounting information that should be said to be reliable if the information comes from economic conditions or events that should have occurred.

Predictive Value

Predictive value can be found in data relating to current financial information or past performance. That is, it can be used as a basis for predicting the future.

Feedback

There are many different ways to get feedback: estimates, reasons, and rejection of past plans.

On time

Information should be provided as early as possible so that it can be used as a basis to assist in making company choices and to minimize delays in decision making.

Comparable or Consistent

The purpose of financial statement comparability is to let people read the reports and see how they compare to those of other companies.

  1. The differences between similar companies using the same methods and principles will come from
  2. Differences in how their economies perform, not from differences in how they use accounting principles and processes.

Materiality (Quite Mean)

If financial reports are important to users, then accounting standards need not be followed. So that the demands of accounting principles can be ignored as long as they do not cause errors or inaccuracies in reports that affect the decisions or judgments of report readers.

Meanwhile, Suwardjono (10: 1996) says that quality financial reports are good, and according to him, good qualities are as follows:

  1. Accuracy. Information must be free from error and bias because errors and bias can reduce the value of information.
  2. Form (form). Information should be presented in a format that best suits the user's demands.
  3. place. Information has a high value when stored information is easy to retrieve when needed.
  4. Timeliness (timeliness). Information will have a high value if the information is renewable alias not stale.
  5. Relevance (relevancy). Information will have a high value if the information is related to the purpose of obtaining that information.
  6. Reliability (reliability). Information will be of less value if the person using the information doubts the reliability of that information.

Materiality Means Enough

Meanwhile, according to the opinion of Romney et al, (2006: 14), states that an indication of the quality of accounting information is:

  1. Reduce uncertainty, support decisions, and encourage better planning of work activities.
  2. Decision making by management will be better if all the factors that influence decision making are considered. If all factors have been considered, then management has a smaller risk of making mistakes in making decisions.

Accounting Information Quality Objectives

Mulyadi (2008), page 19, says that this accounting information system helps us understand the quality of accounting information in the following ways:

  1. Reducing clerical costs for maintaining accounting records
  2. Provide information for managers of new business activities.
  3. Improve accounting controls and internal checks.
  4. Improve information generated from existing systems such as quality, payroll and structure information.

Meanwhile, according to Wiklkinson (in Jogiyanto (2005: 227) that what is meant by the main objectives of the accounting information system are:

  1. Support daily operations
  2. Fulfilling obligations because of an accountability
  3. Support management decision making.

Accounting Information Quality Function

Management receives the information it needs. With the accounting information system can be completed in the company. So, the purpose of an accounting information system is to help management make decisions that will help the company achieve its goals.

According to Romney and Steinbart, there are three important roles played by accounting information systems in a company. These three functions are:

Accounting Information Quality Function

  1. It collects and stores data regarding company activities, the sources of that behavior, and the people involved.
  2. Turning data into information. Planning, executing, and monitoring can all be made easier with this information.
  3. Provide sufficient control to manage organizational assets and organizational data so that when needed, the data is correct and reliable.

FAQs

Below we have summarized some frequently asked questions about accounting information systems, as follows:

What is the Role of an Accounting Information System?

This accounting information system has an important role for the progress of a company, with the existence of an SIA the company can carry out all its activities more effectively and efficiently.

Conclusion

Information quality accountancy also required to present or disseminate information to multiple stakeholders, as described above. Accounting records are used to forecast past, present, and future results.

Information in accounting records is considered reliable when it comes from or is based on a predictable economic situation or event. The most important thing is that the cost of making accounting reports must be equal to the benefits.

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