Chapter 1.0: Introduction or Theoretical Background. Debit The new motor vehicle (30,000) is brought into the business, and the business makes a loss (1,000) on disposal of the old vehicle. Fixed Asset Trade In Bookkeeping Explained.
Relevance and reliability are both critical for the quality of the financial information, but both are related such that an emphasis on one will hurt the other and vice versa. The Accounting Equation Hence, we have to trade-off between them. This research examines the trade-off between relevance and reliability. Credit The old vehicle (17,000-11,000), and the cash (25,000) leave the business and are used to pay for the new motor vehicle. Relevance in financial information refers to the act of conforming or correcting prior opportunities or helping in forming upcoming opportunities. An example of such a case would be the trade off between relevance and reliability. In economics, the term trade-off is often expressed as an opportunity cost, which is the most preferred possible alternative. In case where application of one accounting concept or principle leads to a conflict with another accounting concept or principle, accountants must consider what is best for the users of the financial information.