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A Pragmatic Approach to Accounting Theory By T. K. Cowan - Coggle Diagram

- - - - The need of record in order to report (Concept of Stewardship) which concerned to dependable facts.
      - The need of audit in order to trust (Concept of verification) expressed in the modern context in the auditing.
      - The need of analyse in order to understand and interpret.
- - - - Step 1: Needs
        
        The need to exercise stewardship of physical resources. (i e., safety)
        
        The need to keep detailed and total stocks at the economic optimum levels. (i.e., economy)
        
        The need to ensure that there is a high standard of efficiency in use of raw materials. (i.e., control)
        
        The need to provide a basis for pricing stocks and issues. (i.e., pricing)
        
        The need for analysis of issues in accordance with the direction of use. (i.e., costing)
      - Step 2: Objectives
        
        Safety
        
        To keep separate records of receipts, issues and stocks on hand, for each item of raw materials.
        
        To provide for the regular counting and recording of physical stocks, with comparison with records.
        
        To make a close investigation of differences, and to report on these.
        
        Economy
        
        To set minimum stock levels for each item of stock, on a scientific basis.
        
        To set economic order quantities for each item of stock.
        
        To keep both of these under constant review in the light of changing projections of use and other relevant cost and revenue factors.
        
        Control
        
        To compare each usage of material with an accurate efficiency standard.
        
        To investigate and report fully on all variances and variables, including wastage and spoilage, and to do this for each individual usage of materials, so as to pinpoint the causes.
        
        Pricing
        
        To record costs as well as quantities of each item of stock purchases, and for each item of stock held.
        
        To establish what is the optimum basis for pricing issues and stocks (e.g. among Lifo, Fifo, replacement cost, actual cost, average cost, standard cost) .
        
        To provide for the separation out of the differences between the costs of materials and the selected basis for pricing issues and stocks.
        
        Costing
        
        To charge issues to each job, process, department, or function, responsible for their use.
      - Step 3: Methods:Rules
        
        The methods and rules are aimed at meeting the objectives, subject to the restraint of practicality and such standards as economy, timeliness, and accuracy. Accuracy may be a very desirable standard, but it may be compromised to some degree in the interests of timeliness and complexity of current price costing involves costs which will exceed the addition to revenues (including the value for management information purposes). The final set of methods and rules has to be capable of integration into the total system of the enterprise, and this may require further compromise.