2. An Accounting Theory
• is the art of recording , classifying
and summarizing in a significant
manner, and in terms of money,
transactions and events which are
in the part least of a financial
character and interpreting the
results thereof.
3. An Accounting Theory
It is also a service of activity.
Functions:
to provide quantitative information, primarily
financial in nature
Economic entities that is intended to be useful in
making economic decisions
In making reasoned operating choices among
courses of actions
6. Proprietary Theory
Owner of the Centre of attention
Balance Sheet Equation: Assets- Liabilities =
Proprietors’ (owner’s) equity. More assets
center and balance sheet oriented. Net
income (Revenue-Expenses)
Income-
the increase of wealth of the owner fro
business operations during the period of
time
7. The Entity Theory
The enterprise is separated from the owners
Accounting procedures are conducted from the
view point of the Entity
2 versions of entity theory
Traditional view- business operates for the
benefits of the equity holders that those who
provides fund for the entity
New Interpretation- the enity as seen as in in
business for itself and interested on its own
survival
8. The Entity Theory
Balance Sheets
Equation: Assets = Equities
Income
Defined as a change should be
considered a distribution of earnings rather
than expenses knewn as the Physical
Capital Concept
9. The Fund Theory
Is a unit of operations, a center of interest
with specified purpose or a set of
activities, consisting of assets and equities
Equation: Assets= Restrictions on
Assets
The broad concept of fund theory
introduce the Cash Flow statement
10. The Commander Theory
It focuses on effective economic
control of the resources
People on the centre of actions,
people who control over the
company’s resources
11. The Investor Theory
Accounting functions and
financial statements should take
the point of view of investors who
are shareholders and creditors.
Accounting equation: Assets=
specific + residual equities
12. The Enterprise Theory
It views the enterprise as a social institution
where decisions are made that affect a number
of interested parties
Management as views as the guardian of the
company who is responsible for its survival and
growth. Managers act as a mediative function
among the various interested parties
The theory introduces the concepts of Value-
added income
