Is Accounting Information Always Represent Fair And True Perspective?

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Accounting is denoted as the language of business. There are two basic functions of accounting, one is the measurement of organizational activities and second is communication of these measurement with people in society. People in society need this information to make well informed decisions regarding companies in order to allocate resources (Williams et al., 2009). Furthermore, Mayer and Huinink (1990) argued that; in a society social entities (i.e. people/government/ creditors/ investors etc.) do not count only for number of people, but also deals with how these entities are connected with each other i.e. their interrelationship. Since accounting has the ability to transmit information about organization, therefore; in order to smooth…show more content…
There is dominant need to investigate the theories related to accounting in reality. A theory according to Banerjee (2010), is a validated proposition which has been tested for its conformity with reality. Consequently, it can be considered that; theory is a system which includes both variables and concepts. Where for relationship among concepts, proposition are used and for relationship among variables hypothesis are developed (Bacharach, 1989). Similarly, Hendriksen (1982) termed an accounting theory as a comprehensive set of principles, based on logical reasoning that add support through firstly by provision of general framework aimed at evaluating accounting practices. Secondly by providing support for the development of new practices. In addition to this, according to him, accounting theory must possess the ability to guide accounting practices by provision of sound evaluative framework. So, beginning with the concept of true and fair perspective of accounting, Heit (2007) conceptualized that discrepancy in meaning exist for the same terms of accounting among different individuals. That is the major reason due to which economic reality cannot be measured accurately. For instance; having a fair value for an asset will differ considerably between acquiring party and selling party. For one party it may be amount spend on acquisition of an asset and for other an amount earned by
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