Accounting theory and current issues

HI6025 Accounting theory and current issues


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Introduction


The assignment is focused on the conceptual framework. It is a well-known fact that conceptual framework is one of the most important factors that is responsible for the success of the organization.  There obviously is no chance that the organization can claim to be successful. Thus it is very important for all the organizations that they must have a properly developed conceptual framework. The assignment is going to deal with the accounting standards also. One thing to be noted here is that the accounting standards are also very important to be followed by all and without these accounting standards there might not be possibility of the success of the company.

Assignment’s 1 Question Answer


Miller and Reading define that the importance of Accounting Standards can ever be over emphasized. There are different reasons that the accounting standards are used. The very first reason to use the accounting standard is that there are numbers of people who are not even familiar with the concept of the Accounting Standard let alone use them. Thus the very first reason that the Accounting Standards are defined by Miller and Reading is, that the people can come to know about the Accounting Standards as well as the conceptual framework. Another reason by defining the conceptual framework is that sometimes when people especially the professional seem to take their approaches for granted then it becomes necessary that conceptual framework must be defined. As without the proper demonstration of the Accounting Standard it simply is not possible that these might be applied in the real case. (ICAI, 2016)

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Miller lays the emphasis on the versatility of the conceptual framework or in other language it can be said that he suggested that the Accounting Standards must serve more than one purpose i.e. the importance was laid down on the multi-purpose approach of the Accounting Standard. When it comes to the accounting standard these must have a full-fledged pre-defined standards which can be used whenever needed and also become an essential part for the successful financial reporting. Without the appropriate and proper financial reporting it simply is not possible that the success of the company may be ensured. It is a well-known fact that the company whether big or small always need financial reporting system. Is it possible that the company may be defined its performance and other stuff without the proper financial statements. One other thing that is to be noted here is that this financial system is not only confined to the top management but also to the other concerned individuals.

When the financial reports are prepared they are not only prepared for the top management of the company but also for the other individuals. This is the reason that must be prepared with this point keeping in mind and thus they must be prepared in a way that they can be used by the other entities also. Thus it is very important for all the organizations that they must have a properly developed conceptual framework. It is a well-known fact that the company whether big or small always need financial reporting system. Is it possible that the company may be defined its performance and other stuff without the proper financial statements. This is the reason that Miller lays the emphasis on the versatility of the conceptual framework or in other language it can be said that he suggested that the Accounting Standards must serve more than one purpose i.e. the importance was laid down on the multi-purpose approach of the Accounting Standard. Without the appropriate and proper financial reporting it simply is not possible that the success of the company may be ensured. Another reason by defining the conceptual framework is that sometimes when people especially the professional seem to take their approaches for granted then it becomes necessary that conceptual framework must be defined. As without the proper demonstration of the Accounting Standard it simply is not possible that these might be applied in the real case.

The importance of the Accounting Standards is:
  • They define the set of the rules for the financial reporting: The very first importance of the Accounting Standard is that they are out of those things which are very essential for the system to work properly. As it is a well-known fact that the Accounting Standards are very essential for the one of the most important things and that thing is the ‘financial reporting’.  The financial reporting system helps in developing the whole system and this is the reason that the importance of the accounting standards can never be over emphasized.

  • Developing the Proper System: The second importance is that because of the accounting standards the proper systems are developed. If nothing at least the Accounting Standard help in making the things work properly. When these things are not able to work properly the whole system collapses and this is where the importance of the accounting standards even increases more.

  • Proper maintenance of the finance: The accounting standards are also very importance from the point of view that they ensure the proper maintenance of the whole system. Is it possible for the companies to look positively to the future until and unless they are being defined properly? Off course not! Thus this is very important for the success of the company that the accounting standards are well understood by them and they are also being followed. (Gresham, 2016)


Thus it can be said that this is the reason that must be prepared with this point keeping in mind and thus they must be prepared in a way that they can be used by the other entities also. Thus it is very important for all the organizations that they must have a properly developed conceptual framework. It is a well-known fact that the company whether big or small always need financial reporting system. Is it possible that the company may be defined its performance and other stuff without the proper financial statements. This is the reason that Miller lays the emphasis on the versatility of the conceptual framework or in other language it can be said that he suggested that the Accounting Standards must serve more than one purpose i.e. the importance was laid down on the multi-purpose approach of the Accounting Standard. Without the appropriate and proper financial reporting it simply is not possible that the success of the company may be ensured. Another reason by defining the conceptual framework is that sometimes when people especially the professional seem to take their approaches for granted then it becomes necessary that conceptual framework must be defined.

 Assignment’s 2 Question Answer


As Watts and Zimmerman defines the ‘Positive Accounting Theory’ is very important for the point of view of the prediction of the things. If a company is not able to predict the things it is doomed to be failed. The very first use of the Positive Accounting Theory is that it helps in making a forecast that how the company will use the accounting in the firm and how is it going to adopt the accounting practices in it. Some way or another, the accounting practices are going to be adopted by the companies all over the world. No matter how small. However it is very important for the firms to understand the importance of the Positive Accounting Theory. (Accounting Scholar.com, 2016)

The companies have different types of transactions going on there and even the nature of the business they are doing is also always different and this is the reason that the Positive Accounting Theory helps in determining the company that what type of accounting standard they must adopt.

There obviously is no chance that the organization can claim to be successful until it follows the standard practices. As Watts and Zimmerman defines the ‘Positive Accounting Theory’ is very important for the point of view of the prediction of the things. If a company is not able to predict the things it is doomed to be failed. The very first use of the Positive Accounting Theory is that it helps in making a forecast that how the company will use the accounting in the firm and how is it going to adopt the accounting practices in it. Some way or another, the accounting practices are going to be adopted by the companies all over the world. No matter how small. However it is very important for the firms to understand the importance of the Positive Accounting Theory.

The Positive Accounting Theory is very important as it defines that what kind of Accounting Theory will work basically for the company and how is it going to work exactly. The Positive Accounting Theory helps the company to know the best method which can be used for the company to make the best use of its accounting method. The company may have different kind of accounting standards that it can apply however the success of the company depends with the adoption of the best method and this is made possible only when the company is able to know the feasible solutions to its accounting standards. The Positive Accounting Theory helps the company to know the best method which can be used for the company to make the best use of its accounting method.

If a company is not able to predict the things it is doomed to be failed. The very first use of the Positive Accounting Theory is that it helps in making a forecast that how the company will use the accounting in the firm and how is it going to adopt the accounting practices in it. Some way or another, the accounting practices are going to be adopted by the companies all over the world. No matter how small. However it is very important for the firms to understand the importance of the Positive Accounting Theory. The companies have different types of transactions going on there and even the nature of the business they are doing is also always different and this is the reason that the Positive Accounting Theory helps in determining the company that what type of accounting standard they must adopt.

The Positive Accounting theory is thus is very important for the successful implementation of the accounting practices of the firm. Sometimes this simply is not possible that the company can implement the accounting standards just with the help of the past review and this are where the Positive Accounting Theory comes in place. Without the prediction the theories to be made for the future is not possible. However this is also of great importance that the company must do a proper research before adopting the Positive Accounting theory as the prediction for the future needs more of research and intuition from the side of the company as well as the top management.

There obviously is no chance that the organization can claim to be successful until it follows the standard practices. As Watts and Zimmerman defines the ‘Positive Accounting Theory’ is very important for the point of view of the prediction of the things. If a company is not able to predict the things it is doomed to be failed. The very first use of the Positive Accounting Theory is that it helps in making a forecast that how the company will use the accounting in the firm and how is it going to adopt the accounting practices in it. Some way or another, the accounting practices are going to be adopted by the companies all over the world. No matter how small. However it is very important for the firms to understand the importance of the Positive Accounting Theory. (Watts, 1990)

Conclusion


The assignment gave me the practical implementation of the conceptual framework of the Accounting Standards. In the assignment even the Positive Accounting Theory was discussed which gave me further practice and further insights of the accounting practices which are needed in this time. This is the reason that all these factors were discussed in detail in the assignment and this is how the assignment made me able to know the details of the accounting standards and how these are important for the success of the firms.

References


Accounting Scholar.com, (2016), Positive Accounting Theory (PAT), [Online], Available: http://www.accountingscholar.com/positive-accounting-theory.html [Accessed 06 January 2015]

Gresham, T., (2016), The Importance of Accounting Standards, [Article], Available: http://smallbusiness.chron.com/importance-accounting-standards-44927.html [Accessed 05 January 2015]

ICAI, (2016), Accounting Standards, [Online], Available: http://www.icai.org/new_post.html?post_id=2805&c_id=221 [Accessed 06 January 2015]

Watts, R., L., (1990), Positive Accounting Theory: A Ten Year Perspective, [Journal], Available: http://faculty.etsu.edu/pointer/watts%26zimmerman2.pdf [Accessed 04 January 2015]

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