Accounting as a discipline has no theory Essay

Accounting is concerned with the collection, analysis and communication of economic information, which can be utilize to make decisions and plans about business by various users. The Committee On Terminology of the American Institute of Certified Pubic Accountants delimitate invoice as follows Accounting is the art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions and events which atomic number 18, in past at least, of a financial use and interpreting the results on that pointof. (Ahmeo Riahi-Belkaou, page 32) Accounting is said to be a language used to communicate information to race. Accounting is also an intellectual national and a profession. Moreover, chronicle is br new(prenominal)lyly constructed and practiced by people for people, which influence workings and relationships in society.See more The stages of consumer buying decision process testThe history of news report stretches back to when the first ancient ac counting system began, which was origin solelyy householdd on measurement and recording activities, and then the significant emergence of double-entry bookkeeping around the 15th century, as a basis for further accounting development that consequently resulted in modern Ango-American accounting in the twentieth century. Whereas accounting was mainly an internal matter where the proprietors were close to the business, the growth of companies led to the take awayment of stewardship accounting. As a result of further industrial development, changing societal environment and establishment of professional accounting bodies, the accounting system should systematically develop in accordance with importance of accounting in modern society. In new-fashioned years, more and more theorists start to assess the nature of accounting surmise as well as argue whether there is an accounting surmisal or not.In this essay, I am going to exam the definition of accounting surmisal and provide e vidence to ascertain the existence of a fatten up accounting possibleness.A theory is defined as a set of inter disturbd constructs (concepts), definitions and propositions that present a systematic forecast of phenomena by specifying relations among variables with the objective of explaining and predicting the phenomena.(Kerlinger, 1964, page 11) According to this definition, the arguing accounting as a discipline has no theory impliesthat as a subject, accounting has no a lucid set of concepts and definitions to explain and predict the phenomena. Obviously, the subject of accounting broadly covers all the phenomena in the scope of accounting. In this sense, the accounting theory refers to a widely distributed peg accounting theory which is a coherent set of principles and concepts to explain and predict all the phenomena.Before examine the nature of accounting theory, I need to get by where the theory come from. A fundamental requirement of a theory structure is that it m ust come to terms with the conditions of knowledge. (Mathews & Perera, 1996,page 52) Simply, the theory is from knowledge, the big question, how do we know what we know? such as, the principles of logic. Correspondingly, one of main characteristics of a theory is a body of knowledge. The study of knowledge is the domain of epistemology, which is concerned with the nature and stemma of knowledge, the scope of knowledge and the reliability of claims to knowledge. Accounting is social constructed and practiced by people and people in terms of its roles. Consequently, Knowledge comes from people. In accounting, we want to capture knowledge and theories of accounting help us to understand accounting better. But there was a big problem arose in accounting in relate to the lack of a knowledge base.In order to solve this problem, SSAP 2 as a first step to provide a knowledge base for accounting was introduced in1971, which defines accounting bases, accounting policies and fundamental acco unting concepts such as, going concern, prudence. Afterwards, more accounting standards were developed. Particularly, corporate report was introduced in 1975 which identified a flake of user groups. But different users normally require different information. The conflicts of interests of information and the inconsistent of accounting standards resulted in the development of a abstract model.Some people argue that a comprehensive accounting theory has not existed at the present time. First of all, I will illustrate a conceptual sickwork to certify this argument according to the following statement In recent years much effort has been directed towards developing a general theory for theguidance of practice. Such a general theory has come to be known as a conceptual framework (Underdown & Taylor, 1985, page 1) A conceptual framework that attempts to offer the theories and explanations was significantly produced and developed in order to construct a single coherent set of accounting principles and concepts which could explain accounting practice. FASB defined a conceptual framework as a coherent system of interrelated objectives and fundamentals that can lead to consistent standards and that prescribes the nature, function and limits of financial accounting and financial statements. (FASB, 1976, page2)A conceptual framework is tend to provide a more rigorous way of setting standards, eliminate the inconsistence between statutory and professional supply and provide a frame of reference for accountants to workress specific issues in the absence of specific standards, for example.An ASB statement of principles issued the qualitative characteristics of financial information. Specifically, comparability assists the development of a conceptual framework which tries to restrict the alternatives available to reporting bodies. But the alternatives may not be absolutely reduced unless a conceptual framework produces the accounting standards on a establishedly coheren t basis. (Mathews & Perera,, 1996, page 109)However, the limitation of a conceptual framework includes the time and cost of preparation. Clearly, it is time consuming and big-ticket(prenominal) to operate. Particularly, some countries with limited economies cannot afford it. Furthermore, a conceptual framework provides too much guidance to accounting and encourages rigidity so that new ideas cannot be intimately introduced.If the conceptual framework is poorly designed, it may only benefit some of user groups. For example, the Trueblood and SFAC 1 Reports give inadequate recognition to the needs of user groups other than investors and creditors. In addition, the conflict of principles still exists in the conceptual framework. The illustrative principles are relevance and reliability in the Statements of Principles. Relevance was preferred at the beginning as opposed to prevalence of reliability later. Therefore, a uniform conceptual framework may be difficult to achieve on the bas is of inconsistent developments so leading to the impossibility of a general coherent accounting theory.On the other hand, Hendriken and Van Breda argue that an general accountingtheory as to a coherent set of principles is possible at present. They define accounting theory as a coherent set of hypothetical, conceptual, and pragmatic principles forming a general frame of reference for inquiring into the nature of accounting. (Hendriksen, E.S., 1977, page 1) The main objective of accounting theory is to provide a coherent set of logically derived principles that serve as a frame of reference for evaluating and developing accounting practice.I strongly do not agree with this statement, because there are some evidences could prove that there is no such an accounting theory involving a coherent set of principles and concepts. First of all, the earlier given example, conceptual framework, proved that it is difficult to achieve it on the completely coherent basis at present. For example, economic ratio analysis predicts the future information are made base on past information. SSAP2 introduced the principles of aggregation and prudence which conflict with each(prenominal) other. Specifically, the accruals concept may suggest research and development be carried forward however the prudent concept may require the expenditure to written off in the present period. Moreover, true and true(p) view hasnt been defined, but accountants are required to produce the accounts with true and fair view which depends on their constructed reality, so it is problematical that it might be fair to you, but not fair to somebody else.Furthermore, Image that shaped accounting theory tries to offer suggestions as to what accounting is all about or should be about. In Davis, Menon &Morgans article, four different images were created to influence the accounting theory in the various circumstances in response to changing social environment. Specifically, accounting was assumed to be obje ctive, as suggested by the image of historical record. But in recent years, new images have been created for accounting theory, which are current economic reality, the information system and commodity. Accountants now believe that accounting is subjective. Hence, the subject and object conflict with each other. We also have to see in what context each image is presented other than see it on its own. For example, the public commodity image has emerged in the context of a regulated environment. Therefore, no one image can fullycapture the essential aspects due to subjectivity and new images are being created to add new dimensions to future accounting theories.Moreover, other images which Solomon and Tinker debate about were created for domination of theory and practice of accounting. Solomon, a traditionalist, advocates neutrality or objective as opposed to the view of Tony tinker, a radical thinker. In addition, image that influences accounting theory could be partial or one-side res ults from view of reality can be produced partially and rather one-sidedly. In other words, accounting theorists created the various images by justifying their views of reality based on observation of social phenomena. Accounting as a discipline has no a complete theory due to the lack of a coherent set of principles and concepts in the scope of accounting and the changing social environment.According to American Accounting Associations Committee on concepts and standards, they concluded that no single governing theory of financial accounting is mysterious enough to encompass the full range of user-environment specifications effectively, hence, there exists in the financial accounting literature not a theory of financial accounting but a collection of theories which can be arrayed over the differences in user-environment specifications. (American Accounting Association, 1977, page 1-2) It is indicated that no one single accounting theory applies to all the user-environments but a c ollection of theories could. For example, different users need different information. Investors need profit information and creditors are satisfied with cash flow information.AAAs conclusion proved again that there is no a complete general accounting theory. In fact, at present no single accounting theory can affect all the user-environments because different users demand different information. We also live in a complex and changing society so that accounting theory only can achieve its compliant objective in one particular time, such as, image. No one accounting theory can also explain and predict all the phenomena. True and fair view is still a myth, how can accountants practice with such a view? A conceptual framework is still developing for trying to achieve a complete general accounting theory.On balance, I agree with this statement accounting as a discipline has no theory. I am of the opinion that in the subject of accounting, there is no a general complete accounting theory w hich is a coherent set of principles and concepts to explain and predict all the phenomena. I have proved with some examples that some of principles and concepts are inconsistent, such as, relevance and reliability, and also it is noticeable that accounting theory is partial and one-side, such as, image, because images that shaped accounting theory were captured through theorists different view which could be partial. Changing social environments also influence images.Clearly, each image only emerges in a particular context and period, as suggested by Davids. In addition, the rudimentary of a conceptual framework which tries to construct a coherent set of principles to explain the practice proved the absence of a general accounting theory. The unblemished poof strongly against the Hendriken and Van Bredas opinion which a general accounting theory have emerged. However, a conceptual framework is still change so I personally believe that a complete general accounting theory could b e achieved in the future in accordance with the complete of a conceptual framework due to the development of accounting in response with the development of modern society.BIBLIOGRAPHYAhmed Riahi-Belkaoui(2000) Accounting Theory, 4th Edition, Thomson Learning.Mathews & Perera (1996) Accounting theory & development, 3rd Edition, Nelson.Underdown & Taylor (1985) Accounting Theory & Policy Making, Heinemann.