List of detailed regulations that accountants follow in order
to create fiscal statements.
Many accountants and comptrollers specially in US, rule-based
system is preferred because if their financial systems ever end up
as a subject of a court or arbitration case, they can point to
specific rules they followed to calculate figures, which created
financial statements.
It establishes a specific and verifiable procedure which is
used when creating financial statements.
Negative side is that it can create needless complexities when
readying fiscal statements.
Principle-based system-
used as conceptual footing for comptrollers and
accountants.
Aim to create guidelines rather than rigorous rules ,to help
accountants in creating financial documents.
Allow flexibility.
Negative side is that information can be undependable or
inconsistent that leads to difficulties when a company compares its
books and financial statements with those of other companies.
Without strict rules and procedures, documents can lack
consisteny: revenue,net and gross income figures , and calculations
of projected revenues can vary widely.