Introduction to the Theory and Context of Accounting (eBook)

Front Cover 1
Introduction to the Theory and Context of Accounting 4
Copyright Page 5
Table of Contents 6
OBJECTIVE 8
ACKNOWLEDGEMENTS 10
PART I: HISTORY 12
Chapter 1. The Origins of Modern Accounting 14
Double-entry 14
Luca Pacioli 17
Pacioli and the Accounting Practice of His Time 19
The "Italian Method" 22
Discussion Topics 25
Chapter 2. The Industrial Revolution: Demand and Response 26
The Factory System 27
Limited Liability 30
The Accountancy Profession 34
Professional Organisation 36
Demand and Response 38
Discussion Topics 38
PART II: THEORY 40
Chapter 3. A Conceptual Framework 42
The Boundaries of Accountability 44
Measurement Assumptions 47
The Construction of Financial Reports 50
The Development of Accounting Theory 55
Discussion Topics 56
Chapter 4. Conventions, Doctrines and Common Sense 57
The Emphasis on Practices 59
Some Conventions Examined 62
Sources of Confusion 65
Oversights and Omissions 68
Necessary Fundamental Knowledge 69
Discussion Topics 72
Chapter 5. Long-term Asset Valuation and Depreciation 73
Depreciation 76
Depreciation and Income Measurement 79
Intangible Assets 82
Discussion Topics 86
Chapter 6. Inventories 87
The Cost of Raw Materials 91
Work-in-Progress and Finished Goods Stocks 96
Profit and Value 101
Discussion Topics 104
Chapter 7. The Measurement of Income 106
Matching Costs with Revenues 108
The Recognition of Revenues and Costs 109
The Matching Process 111
The Income Statement and the Balance Sheet 115
Special Cases in Matching Costs and Revenues 117
Discussion Topics 120
Chapter 8. Changing Money Values 122
Monetary Accounting, Inflation and the Profession 123
Accounting in Current Prices: Long-term Assets 129
Accounting in Current Prices: Inventories 133
Accounting for Changing Prices: Monetary Items 135
The Capital Revaluation Reserve 136
Current Market Buying Prices and Index Numbers 137
Integrated Accounting or Supplementary Reports 140
Discussion Topics 142
Chapter 9. Towards a Theory of Business Accounting 143
Individuals as Actors 144
Means 145
The Environment 145
Action in a Market Economy 147
Financial Position 148
Business Firms 150
Income Calculation 151
Formal Demonstration 152
Summary 154
PART III: ENVIRONMENT 156
Chapter 10. Economics and Accounting 158
Economic Change and the Development of Accounting 159
Scale of Operations 160
Economists and the Theory of the Firm 161
The Accountant and the Firm 163
Differences in Concepts 165
Valuation 166
Income 168
Cost 169
Towards a Greater Understanding 171
Discussion Topics 172
Chapter 11. Politics, the Law and Accounting 173
Financial Reporting and the Law 173
Legal Sanctions 178
Taxation 181
The Relationship between Accountants and Lawyers 182
Accounting without Profit 184
Politics, Law and Accounting 186
Chapter 12. The Utility of Accounting Statements 188
Internal Financial Reporting 188
External Financial Reports 190
Accounting Ratios 193
Limitations of Financial Statements and Ratio Analysis 196
Published Company Accounts 199
A "True and Fair View" 201
The Basic Accounting Problem 202
Discussion Topics 203
PART IV: APPENDICES 204
APPENDIX A. Double-entry 206
Proprietor's Capital 208
Trial Balances 209
Account Balances 210
The Concept of Profit 211
The Income or Profit and Loss Account 212
The Balance Sheet 213
APPENDIX B. The Literature of Accounting 215
Accounting Journals 215
Research Series 216
Further Reading on Accounting Theory 218
INDEX 220