Financial accounting information is characterized by all of the following excepta)It is historical in nature.b)It is factual, so it does not require judgement to prepare.c)It results from inexact and appropriate measures.d)It is enhanced by management’s explanation.Correct answer is option 'B'. Can you explain this answer?

Question

Financial accounting information is characterized by all of the following excepta)It is historical in nature.b)It is factual, so it does not require judgement to prepare.c)It results from inexact and appropriate measures.d)It is enhanced by management&#8217;s explanation.Correct answer is option 'B'. Can you explain this answer?

Answer

It is historical in nature. It is used mainly by creditors, investors, and potential creditors and investors.

Answer

Characteristics of Financial Accounting Information

Historical in Nature
Financial accounting information is historical in nature. It records past transactions and events that have already occurred. It helps in analyzing the financial position and performance of a business over a period.

Inexact and Appropriate Measures
Financial accounting information results from inexact and appropriate measures. It is based on estimates and assumptions which may not be entirely accurate. However, these measures are appropriate and serve the purpose of financial accounting.

Enhanced by Management’s Explanation
Financial accounting information is enhanced by management’s explanation. It includes notes to financial statements that provide additional information about the financial position and performance of a business. These notes help users in understanding the financial statements better.

Not Factual and Requires Judgment
Financial accounting information is not entirely factual and requires judgment to prepare. Accountants need to make decisions about the appropriate accounting treatment of transactions and events. They need to consider various accounting principles and standards while preparing financial statements.

Conclusion
Option B states that financial accounting information is factual and does not require judgment to prepare. However, this is not true. Financial accounting information is based on estimates, assumptions, and requires judgment to prepare. Therefore, the correct answer is option B.

Answer

Objectivity cannotes reliability and trustworthiness. A principle is objective to the extent the  accounting information  is not  influenced by personal bias  or  judgement of those who provide it. It  also implies verifiablity which means that there is some way of ascertaining the  correctness of  the information  reported.

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