Glossary of Inflation Accounting Terms

There are two major ways by which recording of income and expenses takes place in accounting. These are cash basis and accrual basis.

See Also: 

Cash Flow Evaluation

Accounting for Accrual for Expense

Business goes incomplete with lack of systematic Information System. Entire work be it internal storing, transferring or among other departments, this is probably carried out with systematic Information System. But have you ever wondered what comprises this Information System? Before moving ahead let’s get to know in detail what information systems objective have to do with?

What are Information Systems?

Basically an Information System is a company’s organized system that mainly comprises of the collection, organizing, storing and communicating of information’s. Any type of specific information systems helps in supporting various operations and management along with the decision making process of any company. Information systems are quite efficient resource being available for a company. Thus they need to be taken special care off.

Is information systems objective necessary for your business?

Why is there a need of information systems?

The major necessity of Information systems lies in improving efficiency along with increased productivity. In fact in a business world the well organized information system ensures your level of profitability and loss. Organizations genuinely run on tracks of information’s. Thus every business entity follows their self style and technique of information collecting. Thus there is a certain need of information systems objective to be followed.

Various objectives of Information System:

Thus the objective behind this Information Systems has been clearly certified with professional benefits.

SEE ALSO: 

Reasons to use accounting information system for your business!
Different Types of Accounting Information System

Benefits of accounting information system for business

The basic use of accounting information system is to increase the profit from the information related to your data. You should know how to mind the data. It might be that you are not using the information related to the data to the fullest. However, this petty informationis very powerful information, and they help you make many useful decisions as well.  

What are the kinds of accounting information system?

Firstly there is accounting information done through aspreadsheet, manual accounting information system and the last is through various accounting software. All three of them are very different from each other in their own way. You must make it a point to choose that kind of accounting system which will meet the requirements of the company in every way.
Keeps track of transaction activities through various tools

Whichever system you use, each and every one of them contains certain tools which will help you keep a constant track of each and every step you take in your business. This is sort of like minding your business.

Keeps track of the latest business trend

Managers or head of the business uses the tools available to expand their business report according to the latest business trend thereby making aplace for future expansion.

Keeps the system updated

The accounting information system helps to keep the system absolutely updated. Manages the expenses and maintains all kind of system information. This maintains a healthy atmosphere of the business by changing business plans frequently and taking steps which might be fruitful for the business later on.

Changes the business model for increasing sale.

You must use only that accounting information system using which you can very easily show the change in business model indicating growth rate in the system. The system must be able to give you a complete idea of what might happen to your business system if you indeed increase the sales.

Every company must have this

In today’s world of competition, you must make use of every possible way to keep yourself ahead of others. Accounting information helps you do just so. Thus do not waste another minute before indulging your business in accounting information system. 

What is accounting information system (AIS)

Knowing Accounting Information System

Four Approaches to Accounting Development

Information Accounting

Accounting Information System (AIS) involves collection, recording and processing financial or accounting information. This information collected and stored are used by the management for their decision making process. Unlike the traditional accounting, AIS follows a computer-based method that tracks the accounting activities in a company with the usage and support of information technology.

Once the information is collected and recorded in the computer system, as and when required, the results of the accounting activities are generated in the form of a report. Managers use these statistical reports for planning and decision making purposes. Statistical reports generated from accounting information system are useful for both internal and external stakeholders. The internal stakeholders like managers can take decision on how to carry out business operations. The external stakeholders like customers, investors, suppliers etc evaluate the financial reports to make their purchase or investment decisions.

The major benefit of accounting information system and its computer based tracking method is that it is automatic. There is no manual entry involved in tracking accounting activities in this accounting system. Thus, there will be no possibilities of any errors. AIS help in advanced data modeling and data mining. The process of accounting information system involves the extraction of data from the database, process the data, and then convert the data summary as information. The internal and external stakeholders to analyse the information access this information. This will enable them to make appropriate decisions.

However, it is required that these reports are generated on time so that the data accessed by the decision makers or managers are relevant, accurate and not outdated. Thus, the analysis made based on the report will be effective. AIS reports ensure consolidation of data so that the managers are not required to go through numerous transactions to interpret the actual financial position of the company. However, for larger organizations, due to large number of daily transactions, the statistical reports generated through AIS may take several numbers of days or couple of weeks. This will be a time consuming process for larger companies. Still, the reports will be accurate and relevant.

When you are to pursue your studies in accounting and consider it to be your future work, then you would be left with two options, you have to choose from public accounting and non-public accounting. When you are a public accountant, you would be acting as a third party who would examine the accounts prepared by any concern, while as a non-public accountant, you would be maintained the accounts of any concern on behalf of the concern.

If you know the difference between public accounting and non-public accounting, it would be easy for you to pursue one.   

Training 

Being a student pursuing Public accounting, you would be trained to analyzing the accounting system, collecting various evidences, and testing out if all the assertions are correct. You would be trained of the accounting standards and need to check those.

However, if you take private accounting or non-public accounting as your specialization, you have to learn about the accounting transactions, recording them and maintaining them. Your knowledge would be limited to those areas where you would be accountable.

Certification and Experience
For being pursuing public accounting you would need certification from CPA or certified public accountant, whereas a private accountant would not need any such certifications. Depending upon the range of clients that you have, you experience would vary when you would be pursuing the job of public accountant, whereas as a private accountant your experience would be confined to the type of industry you are working.

Other differences
Apart from the basic differences mentioned, in public accounting, the work space would vary from one client to another. Hence, in some places when you can expect to have good people around you, somewhere things would be tough. In case of private accounting, you would be working with your colleagues in a more stable position where tensions would not be that much.

Again, in public accounting, there would be harsh deadlines that you have to follow, and one have to travel a lot, however, there would be no such requirement in case of private accounting. The exposure is much more in public accounting than in private accounting, thus while choosing one; you need to check out your qualities and skills.

Basic Principles of Accounting

Accounting practices follow certain rules. The set of rules and procedures that constitute acceptable accounting practice at a given time is GAAP, which stands for generally accounting principles. In order to generate information that is useful to the users of financial statements, accountants rely upon the following principles below:

Objectivity Principle - Accounting records and statements are based on the most reliable data available so that they will be as accurate and as useful as possible. Reliable data are verifiable when they can be confirmed by independent observers. Ideally, accounting records are based on information that flows from activities documented by objective evidence. Without this principle, accounting records would be based on whims and opinions and is therefore subject to disputes.

Historical cost - Principle states that the acquisition of asset should be recorded at its actual cost and not what the management think about of its worth at reporting date Revenue Recognition Principles - in this state revenue is recorded when goods are delivered or the services has been performed or rendered

Adequate Disclosure - its means that all vital accounting information that affect the understanding of accounting firm should be disclosed on the financial statement Materiality -

Materiality - depends on the size and nature of the item judged in the particular circumstances of its exclusion. In deciding whether an item or an aggregate of items is material, the nature and size of the item are classify together. Depending on the status of its nature, either the size of the item could be the determining aspect.

Consistency Principle - Compnay should use same accounting approach from period to period to meet the compatibility over time within a single enterprise. Nevertheless, changes are permitted if justifiable and disclosed in financial statements.



SEE ALSO:
Accounting Basics 

General Accounting along with its Reporting

Understanding About Accounting Basics

Accounting can be defined as the utilization of a system of formulas, terms & other record keeping devices which enables business persons to trace, compare and calculate their growth in the financial industry, or in a few cases recession. The general accounting concept, the equations in accounting, comprises calculating and recording assets of a particular business company, equity as well as liabilities. In this way, financial position of any business could be understood and assessed in a quick & easy manner. Other concepts which are more in-depth in the accounting industry include handling payroll, auditing, and investments for the companies.

Accounting is one important discipline in education

It’s taught in majority of the universities & colleges & even in a few of technical schools as well as high school classes. At the moment, there are numerous levels of specialties, degrees and govt. needed licenses which anyone can, or should, acquire in the accounting discipline. For centuries, accounting has been practiced & taught as a major discipline & it still continues to develop as researchers and practitioners in the accounting field encounter constantly changing business, legal and financial issues. Depending upon how an individual likes to be involved in accounting, he/she must get some type of training in the accounting arena. Accounting for big industries, for instance it might need whole teams or departments of expert accountants.

Conversely, somebody who just wants to keep track of his/her part time business finances will be able to manage accounting using a general knowledge of accounting formulas and concepts.
Accounting - An essential component of any commercial success
Accounting offers business administrators a method for evaluating the financial position of their company or business. With the help of this financial data, administrators can match the economic status of their firm to previous economic years or periods, set genuine aims for future fiscal years or periods as well as make decisions which depend upon or have an effect onto the capitals of their business.

In addition, accounting reports notify the employee of the firm, shareholders & the  public user regarding the financial standing of the company. Literally, by law, all the businesses are needed to file some type of accounting information to IRS or/and other financial & govt. entities. Auditing, whether external or internal, is a crucial function of company. Having efficient & sound accounting practices can make sure a positive audit.

For common people who never studied proper accounting, the words debit and credit could be very confusing. When putting XXX amount in your personal bank account, the cashier tells," Your account is credited with the XXX dollars," furthermore, when you take out your cash YY from the account, the cashier tells," Your bank account is debited with YY dollars." It’s crucial to know the difference between in credit & debit, since everybody in the present time uses of debit & credit card machines.

Nevertheless, you need to forget whatever you might have learned about these 2 words, as in accounting language, debit defines a bank account whereas the cash your bank owes to you is credit.
In accounting, neither credits nor debits are considered as 'bad', since the 2 should be equal to one other & stable themselves ultimately at the conclusion of any calculation.

For each transaction that is recorded, whether it’s an amount put or a paid bill, in the accounting system, there must be 2 entries, one for credit and other one for debit. Such a system is called as 'double entry system’ in accounting. Hence, when the cashier at the bank tells he’s crediting XXX dollars in your bank account, he’s making a debit-entry for the same XXX money at the same time, although you’re not informed about that particular debit entry. Similarly, when the cashier debits your bank account by YY dollars, he creates a credit entry for that amount somewhere else.

The easiest way to learn about debits & credits in accounting is to understand what you gathered & from where did it originated. In accounting language, the thing you collect will be a debit, while credit will be from where you had it. For instance, you bought a television, using your credit card. The television will be the thing you’ve collected, means it’ll be debited in the world of accounting, whereas the credit is reproduced by the responsibility made in your credit card using an exactly identical sum.

Your deal with the bank might be very confusing when you consider these two terms. This is particularly true when you’re talking of accountabilities. The fact is, it’s not all that tough to learn. For instance, when you put money into your account, the responsibility of your bank to you rises by the sum which you’ve put, since the bank will owe you the money you’ve put. Now, all the responsibilities will be credits. Hence, the bank will credit your account with that much sum. Conversely, if you withdraw a particular sum of cash from your bank account, you’ll minimize the liability of your bank, hence the bank will debit the liability account.