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CMA Foundation · Fundamentals of Financial and Cost Accounting · Four Frameworks of Accounting and Forms of Organization

Under the conceptual framework for financial reporting, which pair of characteristics are called the two fundamental qualitative characteristics of useful financial information?

Relevance and faithful representation are the two fundamental qualitative characteristics of useful financial information. Information must be capable of influencing user decisions and must depict economic events truthfully. Comparability, verifiability, timeliness and understandability only enhance usefulness once these two are present.

  1. AComparability and verifiability
  2. BRelevance and faithful representationCorrect
  3. CTimeliness and understandability
  4. DMateriality and prudence

Explanation

The framework names relevance and faithful representation as the fundamental characteristics. Comparability, verifiability, timeliness and understandability are enhancing characteristics, so the pair in the first and third options is wrong. Materiality is an aspect of relevance, not a fundamental pair with prudence.

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