The accounting framework contains four traits or characteristics known as qualitative concepts that all useful financial information used by managers and investors to support business decisions should possess. According to the accounting framework, the four concepts that make financial information useful are as follows:
- Understandability
- Relevance
- Reliability
- Comparability
Understandability
For accounting and financial information to be useful, it must be presentable in a format that the users of accounting information understand. Accounting is a medium of communicating financial information about the affairs of a business. Therefore, accounting information should pass the basic tests or requirements of a normal communication medium.
Basics in communication dictate that if the message being transmitted by the sender to the receiver is not understood, then no communication has taken place. Accounting information must be understandable by its target users if meaning is to be gleaned from it. It must also be understandable if accounting information is to be useful in supporting decisions made by users of accounting information.
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