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Your assignment is to prepare and submit a paper on whether or not accounting is an objective subject.
Your assignment is to prepare and submit a paper on whether or not accounting is an objective subject. Accounting records and financial reports became .the bases of decision-making by managers, investors, creditors, and the state (for taxation purposes), and as such assumed such importance in the allocation of economic resources and undertaking of social processes. It is for this reason that accounting evolved from a mere procedural activity to a socio-economic-political undertaking around which the body of accounting theory has thrived.
Financial accounting is that subfield of accounting which is concerned primarily with the historical, custodial and stewardship aspects of external reporting to shareholders, government and other users of accounting information outside of the business entity (Mukherjee & Hanif, 2006. In the course of developing a standard method of preparing and interpreting financial reports for the eternal publics, the need for a cohesive conceptual framework became evident. This led to the FASB initiative towards defining a viable approach to financial accounting theory.
According to accounting researcher Hendriksen (1970, in Deegan, 2006 p. 4), the theory is defined as “a coherent set of hypothetical, conceptual and pragmatic principles forming the general framework of reference for a field of inquiry.” The US Financial Accounting Standard Board’s concept of accounting theory, in undertaking the Conceptual Framework Project, is “a coherent system of interrelated objectives and fundamentals that can lead to consistent standards.” (FASB, 1976) For the purposes of the accounting profession, the term “theory” need not connote the “grand theories” that convey broad generalized truths, but rather refers to any framework which helps the accounting professional make sense of aspects of the real world, and which aids in providing cohesion, stability and a structure by which to understand the truth of daily experiences. (Deegan, 2006, p. 4)
Because of the many different perspectives on the role of accounting theory. there is no universal agreement on how .accounting theories should be developed. .
