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What are the elements (characteristics, principles, constraints, and assumptions) of the accounting environment? How do they affect the financial statements? Why are these elements important? How do they affect comparability between companies?

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What are the elements (characteristics, principles, constraints, and assumptions) of the accounting environment?

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Elements of the accounting environment:

Characteristics: The accounting alternative selected should be one that generates the most useful financial information for decision making.

To be useful, information should possess the following qualitative characteristics:
1. understandability

2. relevance

3. reliability

4. comparability and consistency

Reference: http://www.jeffboulton.ca/BAT%204M1%20Note%20-%20Chapter%2012.PPT

Principles: Principles indicate how transactions and other economic events should be recorded. Some of the accounting principles include historical cost principle, ...

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  • MBA, Rochester Institute of Technology
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