With the booming of the economy, accounting becomes more important in the modern society. Accounting is concerned with collecting, analysing and communicating economic information (Atrill&McLaney,2004, p1). Firstly, it can be recognised as a network which connects with the economic information and other different kinds of information in the society. Secondly, accounting is related to people's daily life, affecting everybody, such as personal finance. The statement 'Accounting only has one role which is to satisfy user needs' is deficient. In my opinion, accounting has diverse roles in the society because of its great influences. This essay will describe the diverse roles of accounting in the society based on the functions of accounting and the influences of accounting.
Accounting plays various roles at different levels in individuals, organisations, economy and the society. However, it can be split into two main levels that are a narrow role and a broad role. Narrow role is acting like the solution to meet users' immediate needs, and the larger role highlights the importance of accounting affecting all the society such as the current economic crisis. For examples, one person plans to spend the salary to buy things properly by using narrow accounting theory. Broadly, it has arisen to the level of national financial deficits. Accounting has several functions such as gathering, compiling and reporting financial information. In order to understand the functions of accounting and the influences of accounting, I divide accounting into three different parts that are organization, people's daily life and the society.
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In the organizations, accounting plays an indispensible role in the operation of the companies, acting like the heart of the whole body. Normally, company has three departments of accounting that are financial accounting, management accounting and cost accounting. Financial accounting provides information regarding the financial situation which consists of three main statements that are Income Statement, Balance Sheet and Cash Flow Statement. The accounting information records the data of daily activities of the business which helps outsiders to know more about this company, such as the health of company. Outsiders, such as banks, creditors and shareholders will be interested in the information because the information can affect their decisions on investments. Information of management accounting is important for insiders of the company, such as managers. Management accounting takes a large part in the control and evaluation of the business and its performance. It is important for accountants and managers to use accounting information to keep the business under control. Good accountants and finance managements can help company to avoid risks. In addition, companies have duties to report accounting information on their position and performance to interested parties, such as shareholders. In terms of reporting, accounting information has three major purposes that are external reporting, routine internal reporting and non-routine internal reporting. Therefore, the role of accounting in companies is not only to satisfy the user need, but also to make great influences on the outsiders' choices of their investments, as well as influencing the managers to control and make evaluation.
Focusing on the functions of accounting in people's daily life, accounting happens in society and it is practised by people for people. Accounting information relates many different areas and it is the basic need for people in the society. Modern society is full of data and people cannot live without the accounting which is like a system compiling different information and connecting them with the finance to help people live better. Accounting records the data, analyses figures and gives suggestions to clarify the way people should follow. Taking personal finance as an example, people will make some investments in their daily life such as stocks, funds and bonds. However, there are too many choices for people to make investments. Thus people need accounting to analyse the different data in diverse personal finance products. Accounting is like a guide, summarising and totalling the financial values on the decision of which product is best for people to invest. Morgan depicted that accounting traditionally has played a stewardship role(Morgan et al, 1982, p309). Taking bookkeeping as an example, it is simple to make calculation but it is based on the rules of accounting. Accounting information can persuade people to accept particular realities. People use accounting information to manage their life in respect of incomes and outcomes of their money. Therefore, accounting not only satisfies people's need but also use its power to manage people's life.
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In the part of society, accounting is like a language which is used by people, organizations and society to communicate different kinds of information with the financial data. Accounting provides the information in the form of figuration or graphs which is easier for people, organization and society to understand and solve problems. Accounting not only has one role to satisfy users need but also has great influence on the development of the whole society. Modern society is full of different complex relationships which is not a simple collection of people. Accounting provides rules for economic activities to standardize and protect the development of society. For example, the price level in the marketing is an important part in the society and its increases or decreases are directly related to the people's life. Accounting information can help adjust the price level to be appropriate for people's life. Accountants have duties to provide legible and integrated accounting information for the society because accounting information is recognised to be a historic record of society which improves the social development. False and incorrect accounting information will influence the development of society and people's daily life. Generally, on one hand, accounting satisfies people, organization and society needs, and on the other hand accounting uses its influences to affect the development of society. In addition, accounting has many principles and the most prominent one is True and Fair View. It is like a suggestion for the organization to provide a true and fair view about its financial conditions and operating results. According to the influence of accounting in the society, accounting is the basic need for people and organization in daily life. Therefore, in order to protect the people's benefits and keep the organization developing healthily, we need put the True and Fair View into practice. The True and Fair view does not mean absolute truth about organizations, instead, it focused on the organization natural picture(David Solomon, 1966).
The theory of financial accounting makes influences on the accounting practice. Without the practice of accountants, accounting information would not be gathered as accounting is a human activity. Accounting is acting like a craft by the accountants who have great power to build up economic reality based on a body of theory. The accounting practices are judged by some certain accounting theory such as decision usefulness, historical costs and portfolio risk. A variety of theories are described and explored by accounting theory which is based on the financial accounting and reporting. Similarly, the relevance of theories are also explained and illustrated, which is in order to carry out the practice of accounting and reporting. There exist several complex relationships in the modern society and people need to use accounting to explore these relations. In terms of the impact of complex ideas and regulations on financial reporting, it is easier at a complete conceptual framework level to interpret information generated by financial reporting. The following paragraph will describe the relationship between conceptual framework of accounting and financial reporting.
Focusing on the importance of accounting, it is of great essential of putting conceptual framework into practice in that it helps to advance the role of accounting in the society. A primary structure of recording and reporting financial accounting information was revealed by the conceptual framework. Originally, the first trial of its practice in accounting was carried out by the United States, defining that 'it is a coherent system of interrelated objectives and fundamentals that is expected to lead to consistent standards'.(Statement of Financial Accounting Concepts No.1: Objectives of Financial Reporting by Business Enterprises, 1978) The conceptual framework consists of some basic elements such as objectives of reporting, concepts of financial statements and fundamental accounting entries in the whole accounting system. IASB and FASE are the two main bodies combined to put conceptual framework of accounting into practice. It is indeed with great help to assist accountants to issue and handle with some certain rules and standards in dealing with financial problems because everything needs to be standardized. In the long run, many countries recognised the importance of a complete conceptual framework and hence published their own articles of law, which aims to supplement the system of accounting and improve its role in society. English law is a good example to illustrate the significance of conceptual framework of accounting. However, the basis of the conceptual framework should not be ignored as the objective of financial reporting, and both these parties are under the procession of development mutually.
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To conclude, accounting really plays an important role to satisfy users' needs, in the light of real life, companies and even the society. People use accounting theory to help them plan and manage their salaries spent to the point; companies make use of accounting system to help them better run the company; and the government utilize accounting system to macro control the national economy. Accounting is everywhere and we could not imagine the situation without the umbrella of accounting theory. Hopefully, the body of accounting system should be taken good advantage of, benefiting all.