Accounting Theory 12

Organisations are externally accountable in some way for their actions and activities. They will produce reports on their activities such as profit and loss statements and annual reports which will reflect their objectives and the people to whom they are accountable to, which will include stakeholders(employers, customers, suppliers), shareholders and government departments etc. Collision is stating that it would be hard for finance students to understand any other means of assessing company’s affairs other than through the profit and loss statements.   This statement is completely incorrect as the profit and loss statement is only a small part of how an organisation can be measured in my eyes as to whether it is successful or not.

Profit maximization has been traditionally accepted as the singular and most significant objective of an enterprise.   Corporate social responsibility (CSR) is a “concept that suggests that commercial corporations have a duty towards all of their stakeholders in all aspects of business operations.   These can include (but may not be limited to) employees, customers, suppliers, community organisations, local neighbourhood and shareholders.   According to the stakeholder’s theory, directors should have multi fiduciary duties towards all the stakeholders.   Stakeholders are the people who affect and are affected by the company. The stakeholders view of strategy is an instrumental theory of the corporation, integrating both the resource based view and the market based view, it is opposed to the view where the company solely tries to increase the value for shareholding.   The stakeholder’s theory demands more than satisfaction, I believe that the practice of corporate social responsibility can go hand in hand with competitiveness and profitability.   As we move into the future it is hard to see how organisation can place more emphasis on other performance indicators other than profits as it has always been the single most important thing... [continues]

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