If an investor can use accounting information for two different companies to evaluate the types and amounts of expenses, the information is said to have the quality of
Answer
a. Neutrality
b. Comparability
c. Materiality
d. Consistency
neutrality
comparability
The correct answer is b. Comparability.
To arrive at this answer, we need to understand the meaning of each option.
a. Neutrality: Accounting information should be free from bias and should not favor any particular party. This quality ensures that the information is objective and reliable.
b. Comparability: Accounting information should be comparable across different companies or periods. This quality allows investors to analyze and compare financial information between different companies to make informed decisions.
c. Materiality: Accounting information should include all relevant information that could potentially influence the user's decision-making. This quality ensures that important information is not omitted.
d. Consistency: Accounting information should be presented in a consistent manner over time. This quality allows users to make meaningful comparisons and identify trends in the financial performance of a company.
Given the question's scenario where an investor uses accounting information for two different companies to evaluate expenses, the quality of comparability is most relevant. Comparability allows the investor to compare and analyze the types and amounts of expenses between the two companies, facilitating the decision-making process. Therefore, the correct answer is b. Comparability.