 Hello! In this lecture, we will define cost-benefit principle. According to fundamental accounting principles, while 22nd edition, the definition of cost-benefit principle is information system principle that prescribes the benefits from an activity in an accounting system to outweigh the cost of that activity. Cost-benefit principle will be a cost-benefit analysis. We're looking at the cost-benefit analysis in terms of decisions within the accounting information system. That accounting information system, including system principles, principles of accounting information systems that need to be thought of in conjunction with each other as we put together the accounting information system, that system that will take that beginning data, those financial transactions, put them into the system, process them, and end with a result that hopefully is useful, something like financial statements. So the system includes controls, and includes relevance, includes compatibility, flexibility, and of course what we are concentrating on here, cost-benefit principle. As we think about these other things within the system, the system principles, we need to consider the cost-benefit analysis. So for example, when we're thinking about the controls, what kind of controls that we want to put in the system, there's always going to be ideas that we want to put more controls in the system in order to safeguard certain things. But we have to ask ourselves, are those added controls going to be a cost-benefit? Is the risk of not having the controls greater or less than the cost of having those controls? Those are difficult questions to make because we're making predictions about the future, but those are decisions that need to be made. We also have the relevance. When we're thinking about putting things together and putting them together in a relevant form, we might have things that will have data that will be more relevant or we could compile data into a system that could give our information or end users more information. Again, the question is, will us compiling things differently or putting the data into a different format, will that added information be worth the cost of that? And it's hard for us to think that way because oftentimes we think that we always think that more information is better, more information is always better, but obviously everything has a cost and the gathering of information, the increasing of controls have cost as well. We need to have that cost-benefit analysis in some way to determine whether this these are going to be good ideas or not. Compatibility and flexibility. When we put the system together we want to put it into a format that it's compatible with the resources we have and it's flexible enough for us to make it changes in the future. Again, we need to have a cost-benefit analysis in order to do that. Cost-benefit analysis is actually something that a lot of beginning students have trouble with because we learn all of these systems in terms of the best internal controls, the most flexible systems, how to deal with changing and the best technology out there, and it's difficult for us to try to think about systems when we don't want to put the best thing in there because we're restricted from a cost-benefit analysis standpoint.