Some notes: assumes some background reading etc. Have you watched the videos on this topic? Stakeholders are interested in the performance of the business as expressed in the Accounting Reports: Cash Flow Statement, Profit/ Loss Statement and Balance Sheet.
WHAT DATA GOES INTO THE REPORTS RELEVANCE
Report should contain relevant data, e.g., P/L Statement should contain all relevant R and E data (e.g., don't mix up R&E data from different reporting periods-closing entries), CFS should contain all relevant cash flow data, BS should contain all relevant asset and equity data. Reports should not contain irrelevant data, e.g., BS should not contain asset and equity data from owner or other entities: the entity principle is thus consistent with the reliability of the data. Relevance is reduced if reports are not available in a timely manner, that is, stakeholders should not have to wait a long time to access reports. Relevance is not compromised if immaterial or insignificant data is omitted, that is, if that data would not impact on the decision making of the stakeholder. Reports excluding 'cents' or one days depreciation are examples that would not impact on decision making by stakeholders.
HOW THE DATA IS PRESENTED IN THE REPORTS UNDERSTANDABILITY
Reports that cannot be understood serve no useful purpose for stakeholders. To assist understandability, reports should not use overly technical language and the reports should be designed and formatted to communicate data as clearly as possible to stakeholders. Clear headings, sub-headings and effective use of columns in reports would assist understandability. Perhaps adding charts, graphs and explanations, where appropriate, would also work to enhance understandability.
The data in the reports should be verifiable by documentary evidence. Reports should exclude opinion or bias thus reports should exclude estimates of current market value: the historical cost principle is thus consistent with reliability. The data in the reports should be error free so stakeholders can rely on the reports.
Reports should be comparable over reporting periods and be comparable to the reports of other businesses. Comparability is assisted by following the same accounting procedures or methods each reporting period, such as using straight line depreciation each reporting period for a particular non current asset or using FIFO to value stock for a particular stock item. Comparability is also assisted by using the same classification system in the reports each reporting period. Example. Bad debts could be classified as a negative sales item or a normal expense item. Whatever the classification, it should be applied consistently overtime to assist stakeholders compare performance. Comparability is consistent with the consistency principle.