What is reliability in accounting

Question

I want to know what is reliability in accounting and how would we measure economic reality in accounting term thanks

Answer 1

Reliability means that accounting reports are free from bias and faithfully represent the entity for which they are prepared. The information is neutral and verifiable. Neutrality is achieved by following carefully developed standards and the same results should be obtained by different accountants using the same measurement methods.

 

Accounting reports measure economic reality only to the extent that the rules and standards developed for accounting reflect that reality. An example is the concept of reporting assets at their cost which is measurable and verifiable. But the cost of the asset at any point in time may not be its economic value. Land may increase in value over time so cost does not measure economic reality. A building may decrease in value during certain economic condition below its cost. Accounting represents economic value only to the extent that users of the information understand the principles under which the reports are prepared and can interpret the reports in view of economic conditions.