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Accounting chap 2 vocab - Chap 2 Understandability the...

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Chap 2 Understandability – the quality of accounting information that makes it comprehensible to those willing to spend the necessary time. Relevance – the capacity of information to make a difference in a decision Reliability – the quality that makes accounting information dependable in representing the events that it purports to represent. Comparability – for accounting information, the quality that allows a user to analyze two or more companies and look for similarities and differences. Depreciation – the process of allocating the cost of a long-term tangible asset over its useful life. Consistency – for accounting information, the quality that allows a user to compare two or more accounting periods for a single company. Materiality – the magnitude of an accounting information omission or misstatement that will affect the judgement of someone relying on the information. Conservatism – the practice of using the least optimistic estimate when two estimates of amounts are about equally likely.
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