ACCOUNTING AND ACCOUNTING INFORMATION
FOR, INTERNAL AND EXTERNAL USERS
PRESENTED BY Mr. EMMANUEL FONGEH
IN PARTIAL FULFILLMENT OF AN EXECUTIVE MASTERS DEGREE IN BUSINESS ADMINISTRATION.
At a glance, accounting can appear extremely complicated and confusing. The untrained eye may struggle to grasp the entire nature of accounting and see it merely as an incompressible mass of numbers. However accounting is much more for a company or an economic entity.
As intimated by the title, this thesis proposes the inclusion of information on flexibility as a means of enhancing the accounting information system of business organization. However the inclusion of such information would be incomplete with out prior discussion of the purpose of accounting and its product, accounting information as well as whom the users of accounting information are. I hereby strongly belief that the significance of accounting information cannot be fully appreciated, without first examining all the different individuals who are actually making use of the accounting information.
1.11 Theoretical Framework.
Before the nature of accounting can be addressed, the field of study must first be delineated. This entails an identification of the area of interest and the borders of discipline in relation to neighboring disciplines. Thus a successful definition of accounting should clearly delineate the boundaries of the discipline at a point in time, give a precise statement of its essential nature, and be flexible so that innovation and growth in the discipline can be accommodated.
A number of definitions of accounting have been given in this project, each of which attempts to demarcate its field of study. According to the AICPA (American Institute of Certified Public Accountants) accounting is the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of a financial character and interpreting results thereof.
While accounting may have started as being an art, it is doubtful whether this view is still generally held. The increased use of scientific methods in accounting has changed the discipline to an applied science. (Matterssich 1984)According to Matterssich accounting is a science because of its methodology and applied because of its global orientation. He suggests that it may be regarded as an induced science as it tends to solve problems from which are general propositions induced.
More recently the American Association of Accountants (AAA) defined accounting as the process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of accounting information. This definition gives a broad perspective even though critics see it as too general.
A more comprehensive definition is provided by Asari, Bell, Klamer and Lawrence (1997) and it states that accounting consists of the four key ideas below,
It is by nature a measurement process:
Its scope includes financial and operational information:
Its purpose is to assist the organization in reaching its strategic objectives:
Its attributes are to enhance the understanding of the measures phenomena and provide information for decision making, and therefore encourages actions and supports and creates shared values and mind sets.
The construct of flexibility does not appear in any of the definitions of accounting because the definitions were developed during stable periods. The environment however has changed, uncertainty has increased and predictability has declined. In view of the fact that flexibility is a function of uncertainty, greater value will be attached to flexibility in organizations as uncertainty escalates. It is...