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Pragmatic approach to Accounting Theory - Coggle Diagram
Pragmatic approach to Accounting Theory
Broad & common needs
Study through time and study of system in widely reveal the existence of some broad needs and the development of some common methods and generally accepted standard in meeting of those needs : Zimmerman trace three needs
The need to audit in order to trust
The need to analysis in order to undestand
The need to record in order to report
Survival of the satisfactory
Satisfactory to whom ? for what purpose
Larger the group the fairness to all & general acceptance tend to reflect custom and compromise
With no clear definition on satisfactory Leonard spacek has called ''double standard''
With regular critical examination of current needs, objective, standards, compromises, methods and rules it can emerge satisfactory but need adequate testing of new concept and method on continue basis
Professional responsibilities
Financial reporting is a very important documents for the investor and credit financing in the current business world that most enterprise in undertaken by limited liability companies
The different needs and interest in the content of company financial reports place those responsible for issuance and responsible for their verification of reports in a great position of bias and conflict interest because they exercise of judgement
(Brush fire approach) called as -inadequacy responsibilities in dealing with controversial matters of company reporting although general acceptance provide reliable indication
A Broad approach
Inadequacy of the ''brush fire''
Rules based on ''principle''
''Principle'' in turn were founded on certain relevant ''postulates'' which society accepted fair basis for the development of ''principle of accounting''
But the exercise failed from the outset because of its breath of approach - postulates treat with reasonable reserve but the principle report led to nothing
If the scope of exercise limited to the function of reporting to shareholder it may well have more productive
Pragmatic approach to particular Problems
The process & practice of administrative accounting are powerful evidence of the utilitarian basis of accounting
This models are fit to any accounting activity in fact any human activity which has a utilitarian basis
for example Accounting for raw material usage
The objective of every stage that involve in that need requirement by considering for practicality and economy.
The level of establishments of record in inventory measurement method - without compromise some of the interest
What are the information needed for managerial and how it maintain the needs of every aspect of the use of inventories that might create other needs on the ways to full fill the current need such as safety stock levels, and projection of use
Needs
to exercise stewardship pf physical resources
to keep detailed and total stock
to ensure high standard of efficiency
to provide a basis for pricing stock
to analysis of issue in accordance
Methods and rules are aimed at meeting the objectives, subject to the restraint of practicality and such standards as economy, timeliness and accuracy
1st step in the process is to determination of needs
2nd step in that process is determination of objective based on those needs
Final steps of that process is development of methods and rules calculated to meet those objective within the assess limitation which exist in accordance with the set of economic and professional standard
Accounting is a set of particular set of responses to particular set of needs
Pragmatic approach to Company reporting
Needs
The need of information on financial reports of companies
shareholders
example : - Information concerning the dividend, regular information, regular revenue statement, regular balance sheet other related financial report information
Investors
creditors
managers
Economist
Objectives
Selected with a view to meeting the expressed needs practicality and prudence example as shown at the shareholder branch
The basis of revenue statement prepared, what extent is it the desirable that balance sheet be statement value
Must prepare to satisfy the best interest of shareholders accordingly in the accounting period involve.
Method rules
All the information prepare accordingly with all the method and rules
The set objective must be achieve by any mean cause they do provide a logically determine base for decisions on method and rules
compromise always appear between the method and rules when there is constrain in preparing company report
Professional moral, legal standard will include concepts such as truth, fairness , consistency and objectivity in the even specific objective to meet
Definition & explanation
Accounting is utilitarian
The accounting required to satisfied the demand of stewardship, law and regulation, and reportings
Management needs information to decision making and that information supply by accounting system by accumulating, classifying, analyzing and relating both financial and statistical data.
Value of records - ready access to facts & reliable evidence of facts
There is result of past activities, past decision that related to standards & to individual responsibilities
The value in data classified and accumulated for purpose of prejection