ACCOUNTING THEORY

Accounting Theory



Record 1 - Accounting Theory

Question 1.

Income and fair value are critical components of micro-economics. The fair value is an estimation of the market price that is currently present for the product; without bias.

Question 2.

The ERA has evolved considerably in the past. It has evolved as a result of the continuous need to establish accounting standards that can be relied upon to ensure quality and transparency in practices.

Question 3.

Each development in the ERA brings forth the role and relevance of a different theoretical framework pertaining to accounting theory. This conclusion is based on the fact that accounting theory has experienced rapid developments in the last few decades; and these developments have been had a direct impact on the practical side of accounting practices.

Question 4.

Theory of disclosing demands that consideration is given to the development of new ways through which transparency can be disclosed while ensuring the degree of confidentiality that is imperative for the organization to function effectively.

Question 5.

The private sector functions solely for a profit generation basis. All the private sector organizations that exist are established with the singular objective of generating a profit that can be shared amongst the shareholders of the organization. If the private sector organization serves a socially constructive purpose in the process, then it is imperative to note that this contribution is solely present as collateral to the organization's primary functioning and not an intended by-product of the same. In comparison, the public sector functions with an approach that can best be described as being inverted to that which is observed by the private sector. The public sector functions with the primary objective of serving the general public. Strategies are developed in the public sector with the consideration that the secondary objective of profit generation is only for organizational sustenance and cannot be allowed to conflict with the primary objective of functioning effectively for the sake of public service.

Question 6.

Critical perspectives came forth as a result of the need to constantly address shortfalls and productivity sinks in the schools of thought that gave attention to economic and accounting theory. As economic and accounting trends continued to fall victim to the unpredictable trends of the globalization driven global economy, it became apparent that there was a need to alter the approach in practice at the time.

Record 2

Question 1.

Current accounting measures require the consideration of TCI in the calculation of true profit. However, if Fair Value is incorporated into the equation, a much better picture can be achieved. This assertion is based on the fact that the incorporation of TCI in the evaluation of true profit is an approach that is essentially outdated. It may have served well in the past but it cannot be relied upon to deliver figures that adequately reflect the actual standing of an organization with respect to profit generation. In this regard, it can be surmised that Fair Value remains an undeniably sound and reliable measure. Fair value is sound and reliable because it is an assessment factor that ...