The principles of Accounting Information System

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Accounting is known as the language of business because it record and reveal business information. The accounting profession has developed standards and rules that universally accepted. This common set of standards is called generally accepted accounting principles (GAAP). In developing generally accepted accounting principles certain basic assumptions are made. These assumption provide a foundation for the accounting process. The main assumptions are-

Difference between Copyright & Franchise

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Copyright VS Franchise
Copyrights are exclusive rights granted by the government to the author or the artist enabling him to publish, sell or otherwise control his literary, musical or artistic works. The right to exclusive control is issued for a period of certain years, with the privilege of renewed for another sum of years. 

FOB Shipping Point VS FOB Destination

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FOB Destination
FOB Destination is the freight term indicating that the goods will placed free on board at the buyers place of business and the seller pays the freight costs.
FOB Shipping Point
FOB Shipping Point is the freight term indicating that the goods will placed free on board the carrier by the seller and the buyer pays the freight costs.

Similarities and differences among Depreciation, Depletion and Amortization

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Depreciation is the systematic and rational allocation of tangible and current asset cost over the periods benefited by the use of the asset. 

Depletion is the periodic allocation of the cost of natural resources.

Amortization is the periodic cost allocation process for intangible assets.

Define contingent liabilities. How and when should a contingent liability be recorded in the accounts?

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(a)    A possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise; or
(b)   A present obligation that arises from past events but is not recognized because:
i.                     It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or
ii.                   The amount of the obligation cannot be measured with sufficient reliability.

Physical Depreciation VS Functional Depreciation

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All plant/fixed assets, except land, depreciated. Factors that contribute to depreciation are physical and functional. Physical depreciation arises from the actual use of a plant asset. Functional depreciation is due to obsolescence factors such as technological advances and less demand for a product.

How the cash flow statement may assists users of Financial Statement?

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Cash flow statement may assists users of financial statement in the following ways-
  • A cash flow statement when used in conjunction with the rest of the financial statements provides information that enables users to evaluate the changes in net assets of an enterprise, its financial structure and its ability to affect the amounts and timing of cash flow in order to adapt to changing circumstances and opportunities.

What is meant by team materiality in Financial Reporting?

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Information is material if its omission or misstatement could influence the economic decisions of users taken on the basis of the financial statements. Materiality depends on the size of the team or error judged in the particular circumstance of its omission or misstatement.

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