`Accounting as a discipline has no theory`. Critically evaluate this statement and provide examples to illustrate your arguments.

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`Accounting as a discipline has no theory`. Critically evaluate this statement and provide examples to illustrate your arguments.

Accounting is said to be a form of financial language, which is used to communicate a message. Accounting can be many things to many different people. Society is made up of individuals who are interested in accounting they may be shareholders, stakeholders, employees or the government. Accounting can be produced according to the rules and regulations but can be manipulated to look favourable to users as in the case of NCB. Conceptual framework comes from accounting concepts and conventions. It is used as a knowledge base. Other professions such as medical and teachers had theoretical knowledge backing them up such as science and technology. Whereas accounting originally had no knowledge base and has evolved over time.  

Accounting theory can be defined as the hypothesis to explain accounting. “theories are tools which enable us to see particular problems from different perspectives”. (Lecture notes 1, page 6).

I m going to argue against this statement that `Accounting as a discipline has no theory. In order to evaluate this statement I am first going to write about the background of accounting theory, to understand where and why it was introduced. Then I am going to discuss some of the main theories, which have been introduced to accounting in order to prove my arguments and to see whether accounting as a discipline has theory or no theory.

Accounting has been around “at least since C16”. Accounting as a profession has “been around for over 100 years”. Accounting came around the time of other professions such as the medical profession and teachers, these professions were backed by “theoretical knowledge” which was used in decision making and to reduce uncertainty. (Lecture notes 2, page 4). Accountants at the time were just trained to produce accounts and to keep the general maintenance of books. This was ok for the first 100 years but society has changed due to the fact that a steep growth in population, business and complex organisations with complex transactions. Accounting had no theoretical framework during the early years, which meant there where loopholes and companies could take advantage. David Solomon page 1 states “accountants are like journalists they should report the news and not make it”. The accountants had no theoretical backing.

Accounting had evolved over time with few written and was in effect a collection of traditions, which were not necessarily understood. The development of conceptual framework was originally rejected by the UK but eventually more and more countries followed the idea of the USA. The conceptual framework first arose in the mid 1970s in the USA by the FASB which is the US equivalent of the accounting standards board (ASB, UK). In 1989 the international accounting standard committee (IASC) published an abbreviated conceptual framework entitled framework for the preparation and presentation of financial statements. In 1991 the UK began their own project and eventually a statement of principle was published and rejected. But then in 1999 a definitive document was published.

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The true and fair view in accounting is produced in all published accounts. The true and fair view appears to be an opinion in which accountants are supposed to follow the true and fair view. The true and fair is difficult to define but can be considered as presentation of accounts which are produced ethically, free from bias and within the accounting standards. The true and fair view is produced to make information true and fair but has many problems in interpreting it.

Epistemology regards the theory of knowledge. “Knowledge is used to construct ...

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