Accounting theories are primarily developed to enhance economic decision making prior to financial record keeping and reporting. In the modern times however, industrial activities have had both positive and negative impacts especially on the society and the environment. The government and the society have consistently aired their concern and pressure on companies to address the adverse impacts of business undertakings on both environment and society. In this regard, social and environmental accounting theories have been integrated into the accounting practices to account for these concerns. The strengths, weaknesses and limitations of these theories and their position in the current accounting frameworks are evaluated in this paper. Social Accounting Social theory in accounting practices is concerned with the social responsibility of entities in regard to their recording keeping and financial reporting. Although it is not necessary for companies and business entities to prepare income statements and balance sheets that pertain to social responsibilities, it is important for such entities to evaluate their social achievements and success by evaluating their social performance aspects. Social accounting is used to measure this performance and report the social responsibility of a firm given the social activities it undertakes (Business and Economic Review, 2006, p.21). Record keeping and financial reporting in social accounting is presented in terms of social benefits to the society by firms and social benefits to firms from the society. Strengths Natural resources utilization Social theory in the accounting practice is not only concerned with the social responsibility of firms to the society, but also considers the firms’ efficiency and effectiveness of natural resources utilization. In other words, proper use of natural resources in the activities of the firms is accounted for. Record keeping is done to enhance preparation of financial statements that point out to the utilization of naturally available resources by companies. The social aspects are integral to this pursuit because natural resources are socially owned and therefore the companies have a duty to account for the social benefits and/or costs to society in process of utilizing these resources. Current accounting practices and standards must therefore factor in this aspect during the development process. Employees Employees benefit alongside the larger society from the social responsibility performance of firms. Firms are socially accountable and the fact that employees are integrated in that process is strength. Many other accounting standards only focus on the investment undertakings when preparing financial statements. Social accounting incorporates accounting for activities focused on employee welfare like provision of education and health facilities for employees and their families free of cost transportation and favourable working environments (Auditing & Accountability Journal, 2005, p.346). Society This is primary emphasis of social accounting. It pertains to all social benefits and social costs passed to the society by firms. Adverse effects of the activities undertaken by business entities are accounted for by social accounting. Social responsibility is a mutual action between companies and the society. Both are bound to succeed from the social r
Topic: International Financial Accounting and Theory Institution Affiliation: Date: Introduction Contemporary accounting has emerged to be one of the diverse and dynamic concepts in financial accounting and reporting…
The society can include institutions, social groups, shareholders of organizations, cultures and the society in general. The role of stakeholders in the society, which involves collective contributions by individuals, is the focal point of financial accounting, social and environmental theory.
A conceptual framework is developed from the existing theories. Based upon this an exploratory research is done and along with the subjective belief on the concerned topic a conceptual framework is made by the researcher. Several theoretical frameworks are made after the financial crisis of 1929 and also after the recent financial crisis.
One of the most overarching perspectives is that financial accounting theory allows for deliberations and insights to be developed regarding more effective and efficient accounting practices. Within this context of understanding there are a number of theoretical elements, oftentimes competing, as to the proper nature of accounting progress.
Corporate governance also describes the manner in which company management, board, stakeholders and shareholders relate to each other so that conflict of interest is mitigated. The developments in the corporate governance of the United Kingdom companies have led to influential changes which have stimulated similar amendments in the corporate governance of the European Union in general and that of the United States.
ACCOUNTING THEORYIntroduction To better understand accounting theories there is need to develop an understanding of what accounting is in the first place. This picture is best painted by looking at the history of accounting that will also provide insight into the various accounting theories.
Having said this we now turn to the institutional influences on accounting which are discussed in section 2 and section 3 will later discuss the cultural influences.
According to Roberts et al (2005), there are no two countries with identical accounting practices although a few cases such as those of the UK and Ireland, or the US and Canada where differences are relatively few and relatively minor.
stakeholders in the society, which involves collective contributions by individuals, is the focal point of financial accounting, social and environmental theory. The primary issue concerning social and environmental theory is the way the society determines developments, goals,