1. What is GAAP? Mention any two objectives of GAAP.

Generally accepted accounting principles, or GAAP, are a set of rules that encompass the details,
complexities, and legalities of business and corporate accounting. The Financial Accounting Standards
Board (FASB) uses GAAP as the foundation for its comprehensive set of approved accounting
methods and practices.

The Primary Objective Of GAAP are :

 To provide a standard for the diverse accounting policies and principles.

 To put an end to the non-comparability of financial statements.
 To increase the reliability of the financial statements.
 To provide standards which are transparent for users.
 To define the standards which are comparable over all periods presented.
 To provide a suitable starting point for accounting.
 It contains high quality information to generate the financial reports. This can be done at a cost
that does not exceed the benefits.
 For the eradication the huge amount of variation in the treatment of accounting standards. 
 To facilitate ease of both inter-firm and intra-firm comparison.

2. Write a note on Financial Statement Analysis.

Financial statement analysis is the process of analyzing a company's financial statements for

decision-making purposes. External stakeholders use it to understand the overall health of an organization
as well as to evaluate financial performance and business value.

There are three main financial statements that every company creates and monitors:
the balance sheet, income statement, and cash flow statement. Companies use these
financial statements to manage the operations of their business and also to provide
reporting transparency to their stakeholders.

Balance Sheet

The balance sheet is a report of a company's financial worth in terms of book value.
It is broken into three parts to include a company’s assets, liabilities, and shareholders'
equity. Short-term assets such as cash and accounts receivable can tell a lot about a
company’s operational efficiency. Liabilities include its expense arrangements and the debt
capital it is paying off. Shareholder’s equity includes details on equity capital investments
and retained earnings from periodic net income.

Income Statement

The income statement breaks down the revenue a company earns against the expenses
involved in its business to provide a bottom line, net income profit or loss. The income
statement is broken into three parts which help to analyze business efficiency at three
different points. 

Cash Flow Statement

The cash flow statement provides an overview of the company's cash flows from operating
activities, investing activities, and financing activities. Net income is carried over to the
cash flow statement where it is included as the top line item for operating activities.
 3. Differentiate between Cash Flow and Fund Flow statement.

Table of Difference between Funds Flow Statement and Cash Flow Statement
Funds Flow Statement Cash Flow Statement

1. Funds flow statement is based on broader Cash flow statement is based on narrow concept
concept i.e. working capital. i.e. cash, which is only one of the elements of
working capital.

2. Funds flow statement tells about the Cash flow statement stars with the opening
various sources from where the funds balance of cash and reaches to the closing
generated with various uses to which they balance of cash by proceeding through sources
are put. and uses.

3. Funds flow statement is more useful in Cash flow statement is useful in understanding
assessing the long-range financial the short-term phenomena affecting the liquidity
strategy. of the business.

4. In funds flow statement changes in current In cash flow statement changes in current assets
assets and current liabilities are shown and current liabilities are shown in the cash flow
through the schedule of changes in statement itself.
working capital.

5. Funds flow statement shows the causes of Cash flow statement shows the causes the
changes in net working capital. changes in cash.

6. Funds flow statement is in alignment with In cash flow statement data obtained on accrual
the accrual basis of accounting. basis are converted into cash basis.

4. State the advantages of Ratio Analysis

It is a process of comparison of one figure against another. It enables the users like
shareholders, investors, creditors, Government, and analysts etc. to get better
understanding of financial statements.

The following are the principal advantages of ratio analysis

1. Forecasting and Planning:

The trend in costs, sales, profits and other facts can be known by computing
ratios of relevant accounting figures of last few years.

2. Budgeting:
Budget is an estimate of future activities on the basis of past experience.
Accounting ratios help to estimate budgeted figures.

3. Measurement of Operating Efficiency:

Ratio analysis indicates the degree of efficiency in the management and
utilisation of its assets. Different activity ratios indicate the operational
efficiency.
 4. Communication:
Ratios are effective means of communication and play a vital role in informing
the position of and progress made by the business concern to the owners or
other parties.

5. Control of Performance and Cost:

Ratios may also be used for control of performances of the different divisions
or departments of an undertaking as well as control of costs.

6. Inter-firm Comparison:
Comparison of performance of two or more firms reveals efficient and
inefficient firms, thereby enabling the inefficient firms to adopt suitable
measures for improving their efficiency.

7. Discuss the emerging trends in Accounting.

Accounting is an important element of the business process since a well-run accounting function can provide
timely, accurate and relevant information for decision making.

1. Cloud-based Accounting Solutions

Cloud-based technology will gain even stronger momentum around the business world in 2019.
The concept of using shared resources, including accounting software that runs on the providers’
servers and being able to access financial information in the cloud, has made accounting
information more accessible and the process more efficient.

2. Automation of Accounting Function

Automation in accounting is an accounting trend in 2019 that is fueled by software advancement.

Accounting can now be highly automated without the need for significant physical intervention.

3. Outsourcing
For businesses, outsourcing accounting can allow them to focus on their core business and better
utilize their resources. Such a trend is not limited to small and medium-sized entities; even
big companies are outsourcing their accounting and processing functions to business process
outsourcing vendors, commonly known as BPOs.

4. Integration of Accounting with Operations

With the assistance of accounting software, one of the continuing trends in accounting in 2019 is
to integrate accounting function with all parts of the business. This gives better management of
transactions and timely recording of entries.
 5. Transparency and Objectivity
Transparency and objectivity in accounting have never been more important. Accounting
governing bodies, such as certified public accountant boards, has placed significant emphasis on
this area. 

6. Data Analysis

Information is the key to making financial decisions. Advancements in data centers, database
techniques, and software, has ushered in the age of big data and mining of data to aid management
decisions. Information generated by accounting has always been a crucial component of business
decision-making. 

7. Social Media Integration

Social media is becoming more popular these days and with this, accounting professionals can now
use social media interaction to communicate with their peers and colleagues to updates on latest
business, political, and accounting developments that may impact their work.

8. Changes in Accounting Standards

Accounting standards are continually being revised and updated to keep up with the times. Many
of the standards that were developed before the advent of social media, ad-tech (digital
advertising) “shared” economy (shared rides, lodging etc.). 

9. Proactive Accounting
Accounting function generally used to be reactive in nature, e.g., it records and accounts for
transactions that are past. This is changing now.

10.“Mobile” Accountants

With the emergence of cloud computing, and prevalence and acceptability of electronic
documentation in place of traditional paper-based vouchers, invoices or receipts, accountants are
now increasingly more mobile. 

In an ever-changing business environment, taking note of key accounting trends in 2019 will
help enhance business decisions, compliance and success.

8 Explain the different approaches for valuation of Human Resources in

Accounting.

Human resource accounting is accounting for people as an organizational resource. It involves

measuring the costs incurred by business firms and other organizations to recruit, select, hire, train and
develop human assets.

Following methods of human resource valuations :

1. Historical Cost Method:

This method is based on costs incurred or recruitment, training, familiarization etc. It is developed by
Rensis Likert. This is a very simple method based on traditional principles of accounting.

2. Replacement Cost Method:

Under this method the replacement cost of existing personnel is estimated. Replacement cost
includes the cost of recruitment, training and opportunity cost for the intervening period. This serves the
purpose of making valuation of human resources periodically. It helps in planning for human resources in
future.

3. Economic Value Method:

The payment made to the human resources till their retirement are calculated
and appropriately discounted to get their present economic value.

4. Standard Cost Method:

This method is in improvement over replacement cost method. Under this
method the standard costs of recruitment, training and development are
developed and established every year to overcome complications in
calculations.

5. Present Value Method:

Under this method the net contributions of employees to the earning of the
organisation are discounted to have present value of human resources.

6. Current Purchase Power Method

In this method the historical costs are converted into current purchasing power of money with the help of

index numbers.

7. Opportunity Cost Method:

Under this method the value of human asset is determined in their alternative use or the next best alternative

use. This value forms the basis for valuation of human asset of organisation.

9 Discuss in detail the factors facilitating Accounting Process

As a social science, accounting is affected by the environment in which it operates, but

at the same time, it is one of the factors impacting on this same environment. This is a fact
that points to the interdependency of accounting and its environment.

Lists the following factors that affect a country’s accounting development:

1. Capital Market :
The literature points to several factors affecting how an accounting system develops
and is shaped that could be grouped under “capital market” as a common denominator1.
Namely, although fundamentally different financing systems are involved, in this case the
term “capital market” encompasses both the level of development of financial instruments and
the globalisation level of a given capital market.
2. Financial Reporting System

In explaining the preceding factor, we have explained its influence on financial

reporting. On the other hand, considering a financial reporting system in the context of
individual influential factor primarily implies the existence of singular or dual, that is,
separate or joint reporting for business and taxation needs.

3. Legal System
The previously described influential factor implies an understanding of the legal
system as a factor in how an accounting system is created and how it operates. The legal
systems of most countries can be classified as systems marked by strict adherence to laws and
regulations

4. Political System, Political And Economic Relations Among Countries

The political system as an influential factor is often mentioned in the literature under
the term of colonial inheritance (Nobes, 1998, 170) and as such, it is considered a major
influential factor of accounting systems and reporting systems alike. The impact of this factor
is also evident through history, with invading countries imposing their political, as well as
their accounting system on the countries they have conquered and colonised.

5. Quality Of Accounting Education And The Status Of The Accounting Profession

The quality of education in the field of accounting is often referred to

as a factor in the development and design of an accounting system. Various authors agree that
this factor, if lacking, can represent a constraining factor in accounting system development.
6. Size And Complexity Of Business Enterprises, Forms Of Business Ownership

The influences of these factors are explained mostly together and in a

very similar manner, based on the assumption that larger business enterprises also constitute
systems that are more complex. According to one opinion, it is highly likely that the level of
economic development a country has achieved will affect the number and size of business
enterprises operating in that country

7. Level Of Inflation

An economy’s level of inflation can also be considered in the context of its influence
on a country’s accounting system, in particular because it affects the asset valuation method
and because, in conditions of high inflation, it is essential to have an accounting system suited
to inflationary conditions.

8. Applying And Enforcing Legislative Regulations In Accounting

The accounting systems of countries differ not only by accounting regulations but also
by the degree to which current accounting regulations are applied in practice. This factor can
be viewed as being a continuation of the influence of the political and legal systems, as well
as the way in which a country has set up its accounting regulations.

9. Achieved Level Of Economic Development

The influence of the achieved level of economic development on an accounting system
is also evident in some of the influential factors depicted above. Undoubtedly, the
development of an accounting system is conditioned by a country’s economic development,
that is, by the level of economic development it has reached.
10. Culture

In addition to knowing a country’s legal, political or financing system, it is also

necessary to know something about its culture in order to better understand the country’s
differences and its accounting practice. Even when financial reports are comprehensible to
users with regard to language, monetary unit or the accounting principles applied, culture
should be considered as a factor that affects the development of an accounting system.

The diversity of accounting systems' models of development and functioning is the

result of the diversity of business environments around the world.

14. Explain the relationship of Accounting with other different disciplines

Accounting is a multifaceted discipline of identifying, measuring and

communicating of an organization’s economic health. The discipline of accounting
is best understood when one has strong conceptual understanding of other
interconnected disciplines. Let’s discuss in brief the relationship of accounting
with its related disciplines.

1. Relationship between accounting and economics – When considering

the obviousness of their interconnection what is understood is that both
accounting and economics are concerned with the effective and efficient
utilization of resources, rather, when they are scarce. Both accounting
and economics are meant to maximize the wealth and so the economists
and accountants are consistent with the aspect that capital should be
intact when calculating the income. The income can be distributed
without affecting capital. More importantly, whenever there is a need for
any economical decision making, there is a need for accounting.
2. Relationship between accounting and Mathematics – Accounting
deals with concrete numbers expressing real sums and involving
operations to create a good set of numbers- going beyond the numbers-
determining financial position of a business house and ensuring whether
or not a business is making money. In doing so, it involves basic
computational mathematics. Moreover, the basic system of accounting
needs to be changed into an accounting equation which shows Left hand
side- LHS equals Right Hand Side- RHS. 
3. Relationship between accounting and statistics – Accounting is not
just about the preparation of accounting information, but it necessitates
interpreting and presenting the financial information which leads to
create tables and graphs. The knowledge of creating tables and graphs is
attained through the discipline of statistics. There is another important
factor to consider how accounting is connected with statistics is that it
uses price indices which has to do with creating tables, while the
 interpretation involves making absolute and relative comparison by
means of ratio analysis.

4. Relationship between accounting and Law – Accounting is connected

with law, as it operates within a legal environment and thus all the
transactions are governed on the basis of different acts. Business
organizations are governed by their respective statues that provide many
aspects pertaining to the preparation of accounts. However, it is likely
that accounting influences law and is also influenced by law. 
5. Relationship between accounting and management – Management is
administration of business. It involves organizing and controlling of the
affairs of a business or a sector of a business. Management, in simple
terms, getting things done and the methodology which is put into
practice in order to get the things done or the functions with their
sequence undertaken by a manager is what is said to be management
process which involves: Planning, organizing, directing and controlling
(PODC).