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ACCA Applied Knowledge · Management Accounting · Presenting information

A finance team shows a bar chart of profit by division. The vertical axis starts at $480,000 instead of zero, so that profits of $500,000 and $520,000 appear to differ greatly. Which principle of effective presentation has been breached?

Accuracy and fair presentation have been breached. Starting the axis at $480,000 makes a $20,000 difference, only about 4% of $500,000, look very large, which misleads readers. Information should not distort the message, so axes should normally begin at zero for bar charts.

  1. ATimeliness, because the chart is issued too late
  2. BAccuracy and fair presentation, because the truncated scale gives a misleading impression of the differenceCorrect
  3. CCost-effectiveness, because the chart is too expensive to produce
  4. DConfidentiality, because divisional profits are disclosed

Explanation

Truncating the axis exaggerates a $20,000 difference (about 4% of $500,000) so that it looks much larger. This distorts the message and is not a fair presentation. Timeliness, cost and confidentiality are not in question from the data given.

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