The Primary Qualities of Accounting Information

D

The financial information used to make decisions should be both reliable and relevant.

The two primary qualities of accounting information that make it useful for decision-making are relevance and reliability.

Relevance refers to the ability of the information to impact the decision-making process. It means that the information is capable of making a difference in the decisions that users make. To be relevant, the information should have predictive value, confirmatory value, or both. Predictive value means that the information can help users forecast or estimate future outcomes. Confirmatory value means that the information can help users confirm or correct their past expectations or evaluations. Relevant information is crucial because it helps users assess the potential consequences of their actions.

Reliability, on the other hand, refers to the accuracy, objectivity, and verifiability of the accounting information. Reliable information is free from bias, faithfully represents the economic phenomena it purports to represent, and can be verified through independent measurements. It should be based on a solid foundation of evidence and should be capable of being replicated by others. Reliability is important because it ensures that the information is trustworthy and can be used with confidence in decision-making.

Option D, relevance and reliability, encompasses both of these qualities and is the correct answer to the question. Option A, materiality and comparability, is not correct because while materiality is an important concept in accounting, it is not one of the two primary qualities in this context. Option B, full disclosure and relevance, is not correct because full disclosure is a related concept, but it is not one of the primary qualities being asked for. Option C, reliability and comparability, is not correct because comparability is important but it is not one of the two primary qualities being asked for.