An accounting theory
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This document discusses various accounting theories: - Proprietary theory views owners as central and focuses on assets and equity. Net income increases owner wealth. - Entity theory separates business from owners. Income is a distribution of earnings rather than expenses. - Fund theory views a business as a unit with specified purpose and assets equal restrictions on assets. - Commander theory focuses on people controlling resources. Investor theory views accounting from investors' perspectives. Assets equal specific and residual equities. - Enterprise theory sees a business as a social institution where managers balance interested parties and introduces value-added income.
An accounting theory
- 1. ACCOUNTING THEORY Research by: DR. Cecilia F. Espinosa Philippines
- 2. An Accounting Theory • is the art of recording , classifying and summarizing in a significant manner, and in terms of money, transactions and events which are in the part least of a financial character and interpreting the results thereof.
- 3. An Accounting Theory It is also a service of activity. Functions: to provide quantitative information, primarily financial in nature Economic entities that is intended to be useful in making economic decisions In making reasoned operating choices among courses of actions
- 4. Theoretical Concepts Self-evident statements that portray that nature of accounting entities operating in a free economy characterized by private concepts of property
- 5. Theoretical Concepts Proprietary theory The entity theory The fund theory The commander theory The investor theory
- 6. Proprietary Theory Owner of the Centre of attention Balance Sheet Equation: Assets- Liabilities = Proprietors’ (owner’s) equity. More assets center and balance sheet oriented. Net income (Revenue-Expenses) Income- the increase of wealth of the owner fro business operations during the period of time
- 7. The Entity Theory The enterprise is separated from the owners Accounting procedures are conducted from the view point of the Entity 2 versions of entity theory Traditional view- business operates for the benefits of the equity holders that those who provides fund for the entity New Interpretation- the enity as seen as in in business for itself and interested on its own survival
- 8. The Entity Theory Balance Sheets Equation: Assets = Equities Income Defined as a change should be considered a distribution of earnings rather than expenses knewn as the Physical Capital Concept
- 9. The Fund Theory Is a unit of operations, a center of interest with specified purpose or a set of activities, consisting of assets and equities Equation: Assets= Restrictions on Assets The broad concept of fund theory introduce the Cash Flow statement
- 10. The Commander Theory It focuses on effective economic control of the resources People on the centre of actions, people who control over the company’s resources
- 11. The Investor Theory Accounting functions and financial statements should take the point of view of investors who are shareholders and creditors. Accounting equation: Assets= specific + residual equities
- 12. The Enterprise Theory It views the enterprise as a social institution where decisions are made that affect a number of interested parties Management as views as the guardian of the company who is responsible for its survival and growth. Managers act as a mediative function among the various interested parties The theory introduces the concepts of Value- added income
- 13. Thank you