Business Accounting

Accounting can be define in many different term, it all depend on which segment it is used in. For this case, we are mentioning about accounting in one financial year which will keep track of all the in and out transaction of a particular company.

In this topic, we are discussing on the pros and cons of the rules based and principal based of the accounting standard.

Basically, accounting standard is set up by the committee of the International Accounting Standards Board (IASB) which is make up of nine different country representative in early 2001 to set up an accounting standard for the world wide accountant.

Rules based

Under Rules based accounting, there is a standard set and it is not easy to break and all the rules and regulation of the accounting standard must be followed closely. And Whenever the Company have a lease or a transaction of a sales that involve the cash, it has to be follow strictly through the Generally Accepted Accounting Principle (GAAB) that is also set up by the United States (US) to determine whether or not it should be recorded under the Trail Balance Sheet under Capital Income or Operating Income.

By using Rules Based accounting, it is more secure and company does not need to worried much on the Financial Statement if there is anyone who would try to cheat or do any amendment on the Company account as the people who is doing any amendment, he or she have to go through the process of studying the accountant rule and must be very good at it in order to cheap on the company.

Principal based

As for principal based accounting, it is more flexible and Company or accountant using this concept will be able to choose what kind and type of concept they would wish to use, in another word more on their own interpretation rather than strictly following the list of rules based accounting. Principle Based accounting does not have any exact rules and have very little implementation guidelines to follow, thus Company or Accountant have to...