Exploring the theory and practices of financial accounting


Accounting student should be nourished intellectually - they ought to be encouraged to critique underlying concepts and the social and ideological forces responsible for fashioning any accounting technique. There is a need to pierce the technical surface of accounting to expose the underlying ideology. We should be encouraged to see the seemingly purely technical as inevitable carrying a heavy burden of ideology.


Become familiar with the literature of accounting research in the social accounting that measuring the social performance of enterprises or contribute to these facilities to improve environmental conditions for their employees, and customers and the surrounding environment. Enterprises started to fund independent budgets for this purpose, and plans, short-and long- term for that, and the disclosure of this contribution. Social information is a part of enterprises' general translation of the function of the first accounting measurement. Followed by a second function which is to verify or ensure the social results envisaged this to ensure the validity and accuracy of social information. The needs of clients' social performance to include in annual report are an important in these days. Develop an action plan for audit office includes a program to check the social performance of its clients. Further studies are needed on the subject to maximize the benefit of deeper understanding in social area.


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History of accounting is as old as civilization, among the most important professions in the field of economic and cultural development, and wonderful. This is true, wonderful! Invented writing accountants, finance and banking services developed, invented a system of double-entry bookkeeping, which fueled the Italian Renaissance, there was a need before the Industrial Revolution, inventors and businessmen to stay alive, helped develop the capital markets for the big business of the utmost importance to capitalism , turned into a career that has brought discredit complex business practices that sparked the economic boom in the Horn of 20th, and the centrality of the information revolution which is being transformed into the global economy. The atheist and the twenty-century accounting resemble rocket science, and will continue to be among the critical occupations in the new century.

Evolution of Accounting

Studies show that targeted professional development and academic accountability at the presence of special synchronous both continuity and change. Continuity accounting means that many of the elements of thought and practice has proved useful, leading to stability and continuity in the application until the day though it belongs to the history of the emergence of accounting, and therefore are out it is difficult to accept.

The property of continuity is characterized by positive and negative aspects; Positive Aspects of this special is to maintain the accumulation of experience and increased cognitive development in the areas of accounting methods and applied artistic of accounting.

The negative aspects have is to what could have thought of stagnation and application of accounting, especially if there were accounting rules and principles commonly accepted and is still in place despite the lack of rationale behind them.

With regard to the feature of change, it is the embodiment of a dynamic accounting and ability to keep pace with the rapid advances in the business environment of economic and social. But changes is doing slowly and conservative because the change in accounting are not only after making sure of its necessity and feasibility of a categorical manner, it is not surprising that it takes to absorb a particular phenomenon as a phenomenon of inflation two decades despite the embargo imposed by radical developments in the economic and social climate in which it operates.

Actually, many of the ideas and accounting methods currently in use were not known to the community before, which explains the developments that are expected to occur on the accounting model in the future.

Some features of the historical development of definition of accounting:

Issuance of the American Institute of Certified Public Accountants (AICPA)

American Institute of Certified Public Accountants in 1941 issued a definition of accounting "it is the art of recording and tabulating and summarizing the operations and financial events and the interpretation of the results". Notes on this definition that it refers of accounting is an art or craft, not a field from the fields of knowledge.

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Issuances of the American Accounting Association (AAA)

American Accounting Association issued a relatively new definition of accounting "as the process of identifying, measuring and communicating economic information to enable users of this information to form an informed opinion and take the necessary decisions".

Notes on this definition is that it has added to the above definition the objectives of financial statements to achieve, that is, it focuses on the nature of accounting information, and behavioral effects resulting from them, which means interest accounting activity, and service-activity of information as a communication tool.

In 1975, AAA provided a definition of accounting which has been redefinition of the target that provides information that could be useful in making economic decisions.

From the above it is clear that there is a re-evaluation of objectives, concepts and principles that are the conceptual framework of accounting. Accounting turned from a mere interest in aspects of professionalism of the art of bookkeeping and organization of the accounts as a system of information and communication tool, which refers to the social function of accounting.

Evolution of accounting can be divided into four technical phases. These phases are stage of start-up in the composition of the technical framework of accounting; stage of professional and academic interest in accounting; stage of attention to accounting as an information system; and the stage of interest in accounting as social responsibility.

Configuring the technical side of accounting

Characteristics of This stage are the composition of the technical aspects of accounting, most notably the development of the entry system of accounting system (double-entry) in order to achieve the goals set and the accuracy and regularity of the registration notebook, and access to extract the lists of two interrelated income statement and balance sheet. The two lists are dependent on attribute of a balanced arithmetic as a natural result of the application of the limitation double.

According to the use of double-entry system, accountants have what might be called the theory or approach (diagnosis of accounts) which allows the categorization of accounts to personal accounts and the accounts are real.

Then the evolution of the concept of using this entry-system in line with the needs of the owner of the money, so that the presentation of accounts and the tabulation is consistent with the view of the entrepreneur, which focuses on the financial position of the owners of the project without paying attention to the income statement.

As a result of the evolution of the wishes of the owners in determining the success of their business and provide explanations of events and processes and their impact on the accounting unit. it has become imperative to move from the theory of diagnosis of accounts to transactions theory were added nominal accounts and requires the application of the principle of merit in establishing the transactions, which added an additional burden on the accounting curriculum.

Academic and professional development

Noted that the previous phase had been characterized by the development of arts practical application of accounting and as a tool of internal control on the property, check the wishes of owners, but due to some factors and changes, interest since the early nineteenth century to the development of accounting professionals and academics due to several factors, mainly:

The emergence of the industrial revolution, which request a widening the area of corporate. the need for funding, prompting the development of the principles and accounting rules to meet the needs of creditors and ensure the preservation of capital, not to make distributions from it.

The emergence of joint stock companies, which request the need to accumulate capital and to ensure continuity of the work companies on the one hand, and move towards the separation of ownership from management, which led to the emergence of the concept or the imposition of continuity and the imposition of personal moral independent. It is the last major impact on the accounting, where he appeared important role in the evaluation of management accounting and the results of its work through the preparation of the income statement, which has become important to take instead of the balance sheet, beginning with an interview in the use of the principle of revenue expenditure. A proliferation of such companies has the impact of significant state intervention to ensure a minimum level of disclosure to external parties, requiring the need to review financial statements such as an external independent, and actually began the emergence of professional associations and was the first Society of Accountants in Scotland in 1854, then the compound of accountants and auditors England and Wales in 1880, and American Society of Accountants in 1887.

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The imposition of income taxes on individuals and companies, and requested that growing demand for the services of accountants as a monopoly of the post production of financial information both within and outside the facility.

The emergence of utility companies, such as utility companies, telephone, and transportation, which led to the emergence of the concepts of depreciation of fixed assets owned by these companies and the emergence of popularity and classification of minority rights in those companies after the mergers that have suffered.

Based on this phase is noted that the development may become apparent in the professional field, and the importance of founding a set of values socially acceptable such as neutrality, impartiality, honesty of expression, objectivity in the measurement, accurate financial statements, adequate disclosure is known as entrance ethics of the profession and important step in constructing a theory of accounting, particularly in defining the principles and accounting rules to achieve them.

In the academic field has become imperative for accountants to formulate concepts and ideas and organize a coherent intellectual framework that combines them, and started to interest the development of appropriate accounting model for economic unit.

The emergence of management accounting

Management Accounting appeared and was used as a system of information, this development has been a natural response to the spread of the private school of thought scientific management, which calls for the slogan "What cannot be measured cannot be managed".

It has been taking the development towards management accounting in the first instance in the form of analysis of the results of financial accounting, but the technical development and the use of computers has allowed the accountant area for the development of output of financial accounting and emphasis to the system and use of information in the areas of planning and control. Particularly in rationalizing decisions, with the continuing evolution of management accounting and used in statistics and operations research, led to the development of financial accounting data and preparation of budgets, planning and measuring costs.

Continued the process of developing the role of accounting towards managerial concerns through the use of branches of knowledge other than the impact on the attitudes of financial accounting and function of information production and become an information system starts tip. First to the surrounding environment the input, which is dealing with economic phenomena and various social and interdependent, output is also very dangerous for the accounting system of multiple trends in the information required and the consequent multiplicity of objectives that must be provided by the financial statements.

Accounting of social responsibility

Accounting consider as a social responsibility which is recent stage of development of accounting. It is known that the results of workers accounting unit affects the interests of many groups the most important investors both cases and prospective management, borrowers existing and potential customers, government agencies, working in the accounting unit, customers, suppliers. Because of the potential conflict of interest this groups, the trend is the obligation of the accountant point of view of social means that the reports tend holistic approach, covering the needs of all segments of society without making the view class to another and so are not affected by the equitable distribution of benefits from these reports. It has the ultimate impact in the interest of society in full classes, known as the entrance of social welfare in constructing a theory of accounting.

Social responsibility requires an accounting model based on the basis of social values prevailing in the place and time, with the expansion of accounting disclosure to meet the needs of all communities. It also requires this form to expand the measurement accounting to include external effects to the actions of economic integration and of social cost and social return.

Theory and its role in the field of accounting

the conceptual framework of accounting in the current time is based on a set of assumptions, concepts and principles governing the operations of measuring and recording, summarizing and delivery. For example, "The concept of accounting unit, force measurement unit cash, the principle of continuity, database of cost or market whichever is less, on an accrual basis, cash basis, the relative importance of the principle of an interview revenue expenditures, the imposition of periodic, double-entry system, the imposition of the stability of the purchasing power of money, and the principle of objectivity".

Notes on the above different names given to these components (the imposition of the principle, concept, rule, policy, standard... etc). In the fact that there is no name and one agreed upon between the accountants of any of the previous ideas, for example, double-entry is called the principle or theory or way. There are differences determine the meaning of some concepts, for example, the concept of continuity to do some accounting unit will remain in the conduct of their business to no end, while some believe that what is meant is that the life of the plant longer than the life of any asset owned by the enterprise. A third explanation is the continuation of the existing pattern of ownership of capital or administrative and legal form of the facility.

There is also agreement among accountants in the preparation of periodic reports, but they disagree over the accounting period, and a schedule of progress reports. As well as there is of the opinion that the patrol requires the recognition of the deposits and receivables, while it has found there are facilities to prepare reports on the cash basis or on a combination of an accrual basis and cash basis. There are also many of the concepts within the conceptual framework of current accounting non-specific effect has been nothing more than in its current state is just the axioms of examples "the relative importance, consistency, disclosure, substance over form".

It has noted also that there is a conflict between the policy of caution and the use of cost as a basis for evaluating fixed assets, according to the principle of continuity show the fixed assets on the basis of cost, which may increase the sale value, particularly for the assets of the specialized, which is contrary to the principle of caution. There are inconsistencies in logical the imposition of the stability of the purchasing power of money and the usefulness of accounting information which leads to loss of confidence in the feasibility and effectiveness of financial statements.

On the other hand, the most serious criticism of accounting is the lack of uniform accounting treatments of many similar events, for example, multiple processors of inventory policy by LIFO, FIFO, and the weighted average. In the area of income, which way should follow the basis of production, a sale basis, or a collection basis.

There are also several areas facing accounting, for the level of aggregation or detail of information that is disclosed in financial reports, and the different methods and presentation, and Renewal information must report it at the heart of the financial statements. Other shortcomings in the current conceptual framework are incomplete in the sense that it does not provide definitive answers for many of the problems faced by accountants.

It has noted on the current accounting framework the following points:

Lack of coherence between the components and the lack of standardized treatments for many of the events similar accounting.

Differing accounting practices for ways in which the accountant used in addition to varying measurement bases and calendar.

There is no scientific basis can be relied upon in the area of trade-offs between alternatives, and preparation of financial statements depends a lot on the diligence of the person, perhaps one of the reasons that guided the accountant negligence or being under the influence of the administration or to report non-objective.

The attack on the conceptual framework of the current has been raised from within the profession itself, which raised the same degree by the financial community in general.

In front of all of the above show the need for an accounting theory to have intellectual coherent frame and integrated approach that takes into account the shortcomings and criticisms. The fact that most of the concepts and procedures that are the conceptual framework of the current reflect attention to aspects of technical and procedural practices, they are closer to the customary rules or traditions or conventions, including the scientific principles.


The accounting profession in this way is at a disadvantage compared with other professions such as medicine, engineering and law, for example, there are principles governing the activity of the doctor are derived independently of practice, depending on the branches of knowledge of other physics, statistic, chemistry, and therefore there is no more than one name of particular disease . If we compare that with the possibility of preparation of financial statements different for the same facility for the same period, consumption or to give the name of all the ways of calculating the depreciation of fixed assets for different periods shows the differences between accounting and the other sciences.

Thus, some researchers think that accounting in its present state is closer to art than science and that the properties of science cannot be available. In the sense that it is not expected there will be laws of accounting valid in all times.

The researchers justify this point of view that accounting deals with the phenomena of economic and social is the product of human behavior, unlike in the natural sciences dealing with natural phenomena more likely to identify, measure, predict, and therefore they think that there is an urgent need for accounting theory can be relied upon to guide the practical aspects , and the current status of accounting is limited to a set of rules and conventions that wisdom is difficult to defend on the basis of logical.

On the other hand there is some researchers see that the conventional rules are not flaws in accounting, and there needs to exist. But there need for a clear definition of the use of all of them. The principles necessary for all science, it is a tool for regulating conduct in a particular area so as not to leave the area to choose in order to avoid chaos and confusion. But it should also be noted that the degree of progress of any field from the fields of knowledge is inversely proportional to the degree of reliance on customary rules, the more these customary rules in a particular occupation, the more intervention by the tasks of these professional associations, private professional or governmental bodies the imposition of profiling practices and the imposition of specific choices of committed practitioners.

The needs of clients' social performance to include in annual report are an important in these days. Develop an action plan for audit office includes a program to check the social performance of its clients. Further studies are needed on the subject to maximize the benefit of deeper understanding in social area. Paying attention to resort to expert to assess their performance in the implementation of programs and social activities. The need to strengthen the legal provisions that require many quarters, including the auditor to examine the social responsibility of the facility and the extent of the fulfillment.