Accounting Theory - Paper

4574 WordsAug 7, 201219 Pages
Contents Executive Summary 1 Introduction 2 Theories of Accounting 2 Public Interest Theory 2 Private Interest Theory 2 Regulatory Capture Theory 3 Is accounting Needed (GPFR)? 3 What does the financial department (accounts) do? 3 Why public disclosure became so serious? 4 Principal Agent Outlook 4 Agency Cost- Critical Reason for accounting frauds 6 Three Essential Accounting Areas 7 Capital Budgeting 7 Investments 9 Capital Structure 11 Trade off theory 12 Conclusion 13 References: 15 Executive Summary In this paper our objective is to understand the concept and theories of accounting. The paper explores public interest theory, private investment theory and regulator capture theory. After this our…show more content…
In other words, they measure the volume of financing, if the company is able to implement and ensure the implementation of the proposed investments (equity, bank loans, leasing) What does the financial department (accounts) do? The financial department finally makes a coherent synthesis of all proposed projects and provided funds by establishing an investment and financial plan. Usually, the first draft plan shows a lack of funding and it is the general direction that then takes a definitive decision depending not only on profitability but also on other constraints such easily measurable that risk, the urgency, necessity, or prestige. Even if the financial function is closely associated with the work of balancing the investment plan and financing, the decision is necessarily and ultimately up to the general direction.(Harris, 1998) Why public disclosure became so serious? If the interest of organisation and individuals are not aligned then there are classical cases like Arthur Anderson and Enron comes up in the public world. This case tries to highlight how a corporation like Arthur Anderson came to such demise. 80 years of legendary innovative history in Corporate America that was created by Arthur Anderson was washed up in a matter of 8 years. Internal divisions came up in the company and the world started to look at Corporate America with shame. To align the principal agent theory in practice, Sarbanes Oxley came into operation in
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