Accounting as a discipline has no theory Essay

Accounting is concerned with the collection, analysis and parley of economic tuition, which discount be used to make decisions and plans about backing by unlike exploiters. The Committee On Terminology of the American found of Certified Pubic Accountants defined business transactionhip as follows Accounting is the graphics of recording, classifying, and summarizing in a significant manner and in terms of money, proceedings and events which atomic number 18, in past at least, of a fiscal character and construe the go aways thitherof. (Ahmeo Riahi-Belkaou, page 32) Accounting is said to be a voice communication used to communicate information to stack. Accounting is in addition an intellectual clear up and a profession. Moreover, story is societally excogitationed and practiced by people for people, which exploit workings and relationships in society.See frequently The stages of consumer buying decision ope proportionalityn essayThe history of report system st retches back to when the first ancient explanation system began, which was originally base on measurement and recording activities, and in that respectfore the significant emergence of double-entry bookkeeping around the 15th century, as a basis for further news report t from each oneing that consequently resulted in late Ango-American invoice in the 20th century. Whereas method of accounting was mainly an internal involvement where the proprietors were close to the business, the growth of companies led to the requirement of stewardship accounting. As a result of further industrial phylogeny, changing societal environment and establishment of pro accounting bodies, the accounting possibility should systematically develop in conformation with importance of accounting in modern society. In late(a) years, more and more theorists start to assess the disposition of accounting system as well as argue whether there is an accounting theory or not.In this essay, I am going to exam the definition of accounting theory and entrust evidence to ascertain the existence of a all over accounting theory.A theory is defined as a confine of interrelated constructs (concepts), definitions and propositions that present a systematic view of phenomena by specifying relations among variables with the purpose of pardoning and predicting the phenomena.(Kerlinger, 1964, page 11) According to this definition, the statement accounting as a tick off has no theory impliesthat as a subject, accounting has no a recollective hardening of concepts and definitions to explain and predict the phenomena. Obviously, the subject of accounting broadly covers all the phenomena in the domain of accounting. In this sense, the accounting theory refers to a oecumenic flesh out accounting theory which is a recollective set of principles and concepts to explain and predict all the phenomena.Before examine the nature of accounting theory, I need to retire where the theory list from . A fundamental requirement of a theory structure is that it must 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 system of knowledge. The study of knowledge is the domain of epistemology, which is concerned with the nature and derivation 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 fork out knowledge and theories of accounting help us to understand accounting better. just now there was a big problem arose in accounting in relate to the lack of a knowledge base.In order to understand this problem, SSAP 2 as a first step to show a knowledge base for accounting was introduced i n1971, which defines accounting bases, accounting policies and fundamental accounting concepts such as, going concern, prudence. Afterwards, more accounting standards were developed. Particularly, corporate report was introduced in 1975 which identified a number of user groups. But antithetic users unremarkably require different information. The participations of interests of information and the inconsistent of accounting standards resulted in the development of a abstract framework.Some people argue that a all-round(prenominal) accounting theory has not existed at the present time. First of all, I will illustrate a conceptual framework to certify this business according to the following statement In recent years much(prenominal) effort has been directed towards developing a ecumenical theory for the focusing of practice. Such a common theory has come to be cognize as a conceptual framework (Underdown & Taylor, 1985, page 1) A conceptual framework that attempts to offer th e theories and explanations was significantly produced and developed in order to construct a adept rational 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, subroutine 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 betwixt statutory and professional provisions and provide a frame of recognition for accountants to address specific issues in the absence of specific standards, for example.An ASB statement of principles issued the soft characteristics of financial information. Specifically, comparability assists the development of a conceptual framework which tries to tie the alternatives available to reporting bodies. But the alternati ves whitethorn not be utterly reduced unless a conceptual framework produces the accounting standards on a completely coherent 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 expensive to operate. Particularly, or so countries with limited economies cannot afford it. Furthermore, a conceptual framework provides too much guidance to accounting and encourages rigidity so that in the buff ideas cannot be well introduced.If the conceptual framework is poorly designed, it may only benefit some(prenominal) of user groups. For example, the Trueblood and SFAC 1 Reports give inadequate recognition to the needs of user groups early(a) than investors and creditors. In addition, the conflict of principles stillness exists in the conceptual framework. The exemplifying 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 homogeneous conceptual framework may be difficult to succeed on the basis 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 affirmable at present. They define accounting theory as a coherent set of hypothetical, conceptual, and pragmatic principles forming a general frame of reference for inquisitive 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 accrual and prudence which conflict with each other. Specifically, the accruals concept may suggest research and development be carried forward but the careful concept may require the expenditure to written off in the present period. Moreover, true and sporty view hasnt been defined, but accountants are required to produce the accounts with true and fine 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 hears were created to influence the accounting theory in the various contexts in response to changing social environment. Specifically, accounting was assumed to be objective, as suggested by the word picture of historical record. But in recent years, new images throw off 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 oppo sed to the view of Tony tinker, a radical thinker. In addition, image that influences accounting theory could be overtone or one-side results from view of reality can be produced partially and or else 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 rich 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 armored over the differences in user-environment specifications. (American Acco unting Association, 1977, page 1-2) It is indicated that no one single accounting theory applies to all the user-environments but a collection of theories could. For example, different users need different information. Investors need profit information and creditors are cheerful with cash flow information.AAAs conclusion proved once 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 work 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 arduous to achieve a complete general accounting theory.On balance, I agree with this statement accou nting 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 which 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 incomplete 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 absolute poof strongly against the Hendriken and Van Bredas opinion which a general accounting theory have emerged. However, a conceptual framework is still improving so I personally believe that a complete general accounting theory could be 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 guess, 4th Edition, Thomson Learning.Mathews & Perera (1996) Accounting theory & development, 3rd Edition, Nelson.Underdown & Taylor (1985) Accounting system & Policy Making, Heinemann.