Accounting profit and True Profit Essay

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In first part of the assignments, I have narrowly defined the term accounting profit,
forming a technical discussion on the basic accruals concept and the literal difference between
accounting profit and true profit. This was portrayed by Hines (1988) as simply ‘measuring the
reality’ without questioning who created the reality. Throughout this module, I have developed
awareness on the level of sovereignty held by the standards-setters who determine how
accounting profit is calculated. Instead of focusing on accrual assumptions, this essay will
examine the formulation and implementation of the Conceptual Framework as a whole. The idea
of subjectivity in the adoption of accounting policies has also been extended to professional
judgements of the regulators. Besides, accounting theories will be applied to shape a
contextualised evaluation. For instance, through Critical Theory I begin to question the ‘truth’
initially imparted on me: how reliable is profit figure in financial statement? Two levels of
compliance are involved in answering this question, namely compliance between regulators and
ethical codes in standards-setting, and between managers and accounting standards. Central to
the following discourse would be the money measurement assumption where accounting profit
precludes non-monetary elements such as opportunity costs to ensure consistency with part one
of the assignments.
Reliability of accounting profit – Self-regulation via ethical codes
Before being considered a measure of the true profit, reliability of profit figures shall be
assessed. As highlighted above, regulators are powerful in a way that profit is ‘the outcome of
applying particular accounting rules and conventions … when these rules change, the same
series o...

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...urvey of ethical behavior in the accounting profession. Journal of Accounting Research, 9 (2), pp. 287-306.
Olusegun Wallace, R. 1996. The Development of Accounting Research in the UK. In: Cooke, T. and Nobes, C. eds. 1997. The Development of Accounting in an International Context. London: Routledge, pp. 218-254.
Parker, L. D. 1955. Practitioner perspectives on personal conduct. In: Cooke, T. and Nobes, C. eds. 1997. The Development of Accounting in an International Context. London: Routledge, pp. 68-89.
Rodgers, P. 2007. International accounting standards. Oxford: CIMA.
T.A., L. 1996. Richard Brown, Chartered accountant and Christian gentleman. In: Lee, T. eds. 1996. Shaping the Accountancy Profession: The Story of Three Scottish Pioneers. New York, Garland: pp. 153-221.
Wagner, J. W. 2001. Defining Objectivity in Accounting. The Accounting Review July, pp. 599-605.

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