History Of Accounting

Theory of History Of Accounting

Unit 1: Introduction to Accounting.

Q 1) What is the need for Accounting Theory?

Ans. The goal of management accounting is to help company manager and supervisor to make financial decision where as, the goal of financial accounting is to provide important financial information about company to those outside of the business.

NEED OF ACCOUNTING:

Accounting & book keeping have been around just about as long as human had engaged in trade and commerce. This make sense because if we want to do business to know the financial position and result of the business during a particular period we need accounting.

                 Outsider of the business take financial decisions with the help of accounting.

Q 2) What are the different theories & practices of Accounting Theory?

Ans. Accounting theory is a set of assumptions, frameworks and methodologies used in the study and application of financial reporting principles. 

          Accounting practices is a system of procedure and control that an accounting department use to create and record business transaction.

           Auditor relay upon consistent accounting practices when examine a company financial statement.

Q 3) What are the classification and Levels of  Accounting Theory?

Ans. At present, a single universally accepted accounting theory does not exist in accounting :-

The following are the main classifications of accounting theory:

(a) Accounting Structure Theory.

(b) Interpretation Theory.

(c) Decision Usefulness Theory.

(a) Accounting Structure Theory:

Accounting structure theory, known by different names such as classical theory, descriptive theory, traditional theory.

This theory relates to the structure of the data collection process and financial reporting. Thus, this theory is directly connected with accounting practices.

(b) Interpretational Theory:

Truly speaking, ‘accounting structure’ and ‘interpretational’ theories are part of the classical accounting theory.

Accounting practices under accounting structure theory are the result of recording business events as they take place.

(c) ‘Decision-Usefulness’ Theory:

The decision-usefulness theory emphasizes the relevance of the information communicated to decision making and on the individual and group behavior caused by the communication of information.

Q 4) What is Environmental  Accounting?

Ans. Environmental  Accounting principal are mainly used by organisation to more accurately trace environment cost back to specific activities.

Q 5) What are the foundation of Accounting Theory?

Ans.  foundation of Accounting Theory means the base and book around of it such foundation may be classified by dividing it into factors:-

A) Nature of Accounting Theory:-

i) Follow accounting practices:
Accounting theory extracted from accounting practices. Hence, accounting theory follows practices.

ii) Related to present and future:
Accounting Theory make a critical evaluation of present accounting practices. It also make an effort to build up future guideline so it is present as well as future.

iii) Flexibility:
Accounting Theory follows practices so it is flexible in nature.

iv) No single theory:
Accounting is not a single theory. Accounting Theory is a mixture of different theories some of which are based on contradictory approaches.

V) Two types:
Accounting Theory are of two types:-
a) Descriptive   b) Normative

vi) Based on different approaches:
Accounting Theory consist of those principle which have evolved out of variety of approaches.

B) Roots Or Origin of Accounting Theory:
Root or origin of accounting theory is found in three types of theories:

i) Decision Theory:
The basic theme of decision theory is to supply quality information to the user for taking correct and effective decision.

ii)Measurement Theory:
Proper decision making depends on the occurrence and adequacy of accounting information.

iii) Information Theory:
Information theory process the data. Accounting is basically state house of information. In accounting after collecting the data they are converted into information by recording, analyzing and interpreting them.

Unit 2: History of Accounting Theory.

Q1) What is the "Early History of Accounting"?

Ans. The history of accounting or accountancy is thousands of years old and can be traced to ancient civilization.

The early development of accounting dates back to ancient Mesopotamia, and is closely related to developments in writing, counting and money and early auditing systems by the ancient Egyptian and Babylons. By the time of the Roman Empire, the government had access to detailed financial information.

In India Chanakya wrote a manuscript similar to a financial management book, during the period of the Morryan empire. His book "Arthashasthra" contains few detailed aspects of maintaining books of accounts for a Sovereign State.

The Italian Luca Pacioli, recognized as The Father of accounting and bookkeeping was the first person to publish a work on double entry book keeping and introduced the field in Italy.

The modern profession of the chartered accountant originated in Scotland in the nineteenth century.

UNIT 2