Accounting Theory Essay

Accounting is a human activity defined as the systematic and comprehensive recording of financial transactions concerning a business, thus referring to the process of summarising, analysing and reporting these transactions. Accounting rules are set of conventional procedures or practices commonly adopted by prepares of financial statements. Insights from accounting theories help in the process of continual improvement, meaning that relying on rules alone is not enough; failure of large companies like Enron is a distinctive case. Theory is a coherent set of hypothetical, conceptual and pragmatic principles forming the frame of reference for the field of inquiry (Hendriksen (1970, p. 1). Various theories used in accounting include, but not limited to positive, normative, system-oriented, decisive, and theories of regulation; further explanation of them will be made in this essay. No theory could be universally accepted because researches have different perspective of the role of accounting theory. For example, researchers argue that accounting theory should explain and predict accounting related phenomena while others argue that it should predict rather than describe.

Theory applies to any framework which helps us make sense of aspects of the social world in which we live, and which helps provide a structure to understand our social experiences (Llewelyn, 2003). Theories generate expectations about the globe; they are used whenever people address ambiguity contradiction or paradox so that they can determine what to perform next (Czarniawska, 1997, p. 71). They (theories) aim to provide a coherent and systematic framework for developing, accounting practices, with the evaluation likely to be more effective when a person doing the eva...

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...ted to protect economic interests. Statute law is put in place to benefit groups in conflict that lobby others, while regulators are motivated by egoism.

Critical theory is a touchstone for understanding reality and can be translated into progress and the development of societies that will enable a 'true; more liberal and more just life for all (Deegan, 2011). It is more concerned with social relationships as compared to technical advancement since it offers new approaches for research accounting.

The regulations provide the structure that everyone is required to abide by. For instance, if you are a football player, there are certain rules that govern football, and as a player you expected to follow them. They (rules) can be applied in the provision of financial instructions to demonstrate accountability and bring a genuine and fair view of financial statements.