Understandability is a qualitative characteristic of accounting information that refers to the ease with which users can comprehend the information. In order for accounting information to be understandable, it must be clear, concise, and free of ambiguity. For accounting information to be clear, it needs to be written in a style that is simple to read and comprehend. Use of jargon and technical terms should be avoided, and information should be presented in a logical and easy-to-follow manner.
Conciseness is another important characteristic of understandable accounting information. In order to be concise, information must be presented in a clear and concise manner without unnecessary details. This means that information should be written in a way that is easy to read and understand.
Lastly, accounting information must be free of ambiguity. This means that it should be free of any interpretation or confusion. All information should be presented in a clear and straightforward way.
Examples
Some examples of understandable accounting information include financial statements, accounting policies, and disclosures. Financial statements should be presented in a manner that is easy to read and understand. They should include all relevant information without being overly detailed. Accounting policies should be clearly stated and easy to understand. Disclosures should be included in financial statements in order to provide users with information which is relevant to their decision-making process.