Pragmatic Accounting

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There is no generally accepted theory of accounting. There are a number of accounting theories (though a systematic attempt has been made by Financial Accounting Board (FASB) of USA and IASC and other to formulate a comprehensive theory of accounting). The definition of Accounting Theory given by Hendriksen as “a set of broad principles that (i) provide a general frame of reference by which accounting practice can be evaluated, and (ii) guide the development of new practices and procedures” lead us to perceive accounting theory as a basis of explanation and prediction. The primary objective of accounting theory, as it follows from this definition, is to provide a coherent set of logically derived principles that serve as a frame of…show more content…
Accounting is a system-centered activity carried out to meet particular needs. But a study through time, and a study of systems in widely varying enterprises, reveal the existence of some broad needs and the development of some common methods and generally accepted standards in the meeting of those needs. In their valuable study of accounting continuity,' Littleton and Zimmerman have traced three general and continuing needs which have been and continue to be the concern of accounting: 1. The need to record in order to report. This is the concept of stewardship; but is concerned too with the need for dependable facts. 2. The need to audit in order to trust. This is the concept of verification, ex-pressed in the modern context in the auditing function. 3. The need to analyze in order to understand. The need to interpret, they suggest, is the greatest of these needs, and by corollary the most important of the accounting tasks. Its systematic implementation is through classification, analysis, and comparison. Common needs might well be expected to stimulate common responses, though environmental factors will lead to differences in these responses. Double entry accounting has been one such response, and its value is evidenced by its continuity after some six hundred years of experience. The social need for reliability and comparability of accounting reports has led to
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