Question

Question: What are some of the costs of providing accounting information? What are some of the benefits of accounting information? Describe the cost-benefit factors that should be considered when new accounting standards are being proposed.

Short answer

Answer

Some of the costs of supplying accounting information include: the cost of assembling information, processing, distributing information, and costs of auditing, disclosure as well as potential litigation.

Some of the advantages of accounting information are: higher control of management and availability of capital at a lower cost.

New accounting standards need a demonstration of information that is not easily collected by the accounting systems of most firms.

Step-by-step solution

Meaning of accounting information

Accounting information is defined as the accounting statements processed by way of accounting and bookkeeping. It includes both financial and non-financial data and is utilized by a large body of users such as customers, employees, investors, creditors, and the government.

Costs of providing accounting information

Costs of supplying accounting information comprise the cost of gathering as well as processing, distributing, auditing, potential litigation, exposure to competitors, inspection, and evaluation.

Some of the benefits of accounting information

Advantages to users comprise higher control of management and obtaining capital at a minimal cost. Users may get more effective information for allotment of resources, tax evaluation, and adjustment of rates.

Cost-benefit factors considered when new accounting standards are proposed

New accounting standards need displaying of information that is not easily collected by most firms. Verification should be made to ascertain whether the supplemental costs of supplying the suggested information surpass the additional benefits to be received. Such verification needs an application of judgement as the advantages of the expected information may not be clear cut.