VCE Accounting Units 3 & 4
Relevance - answer Relevant information is capable of making a difference to the
decisions made by users. Relevance requires financial information to be related to an
economic decision. Information is relevant to a decision if it helps users to form
predictions about the outcomes of past, present or future events, and/or confirms or
changes their previous evaluations by providing suitable feedback.
Faithful representation - answer The information reported must be a faithful
representation of the real-world economic event it represents. The user is assured that
the information presented is complete, free from material error and neutral (without
bias).
Comparability - answer Comparability is the qualitative characteristic that enables users
to identify and understand similarities in, and differences among, items. Information
about an entity is more useful if it can be compared with similar information about other
entities and with similar information about the same entity for another period or another
date.
Verifiability - answer Verifiability means the ability to ensure that different
knowledgeable and independent observers can reach a consensus (arrive at the same
conclusion) that a particular depiction of an event is faithfully represented. Verifiability is
maintained by retention of source documents used to record the transaction and
checked through auditing. The purpose of verifiability is to hold the accounting
professional accountable for their work.
Timeliness - answerTimeliness means having information available to decision-makers
in time to be capable of influencing their decisions. Having information available sooner,
rather than later, can enhance its capacity to influence decisions, and a lack of
timeliness can rob information of its potential usefulness. Generally, the older the
information, the less useful it is.
Understandability - answerUnderstandability requires financial information to be
comprehensible to users with reasonable knowledge of business and economic
activities. To be understandable, information should be presented clearly and concisely.
Entity assumption - answerThe records of assets, liabilities and business activities of
the entity are kept completely separate from those of the owner of the entity as well as
from those of other entities. A separate set of accounting records is maintained for each
entity, and the financial statements prepared provide information on that entity only.
Accrual Basis Assumption - answerRevenue is recognised in the period in which the
expected inflow of economic benefits can be measured in a faithful and verifiable
Relevance - answer Relevant information is capable of making a difference to the
decisions made by users. Relevance requires financial information to be related to an
economic decision. Information is relevant to a decision if it helps users to form
predictions about the outcomes of past, present or future events, and/or confirms or
changes their previous evaluations by providing suitable feedback.
Faithful representation - answer The information reported must be a faithful
representation of the real-world economic event it represents. The user is assured that
the information presented is complete, free from material error and neutral (without
bias).
Comparability - answer Comparability is the qualitative characteristic that enables users
to identify and understand similarities in, and differences among, items. Information
about an entity is more useful if it can be compared with similar information about other
entities and with similar information about the same entity for another period or another
date.
Verifiability - answer Verifiability means the ability to ensure that different
knowledgeable and independent observers can reach a consensus (arrive at the same
conclusion) that a particular depiction of an event is faithfully represented. Verifiability is
maintained by retention of source documents used to record the transaction and
checked through auditing. The purpose of verifiability is to hold the accounting
professional accountable for their work.
Timeliness - answerTimeliness means having information available to decision-makers
in time to be capable of influencing their decisions. Having information available sooner,
rather than later, can enhance its capacity to influence decisions, and a lack of
timeliness can rob information of its potential usefulness. Generally, the older the
information, the less useful it is.
Understandability - answerUnderstandability requires financial information to be
comprehensible to users with reasonable knowledge of business and economic
activities. To be understandable, information should be presented clearly and concisely.
Entity assumption - answerThe records of assets, liabilities and business activities of
the entity are kept completely separate from those of the owner of the entity as well as
from those of other entities. A separate set of accounting records is maintained for each
entity, and the financial statements prepared provide information on that entity only.
Accrual Basis Assumption - answerRevenue is recognised in the period in which the
expected inflow of economic benefits can be measured in a faithful and verifiable
