Nature of Accounting and the Accounting Standard

Topics: Balance sheet, Business, Asset, Inflation, Generally Accepted Accounting Principles, Corporation / Pages: 5 (1202 words) / Published: Mar 25th, 2013
Nature of Accounting and the Accounting Standard
Accounting is an important part for business and it is dubbed “language” of business activities conducted by firms. People think it is used to communicate business transactions per se to all stakeholders. However, some people argue that the functions of accounting are not that easy. Except the communication tool, accounting acts as many other difference roles in business. When doing accounting, different standard may be used. There are many issues about accounting standard nowadays. To getting a subjective view of accounting, it is necessary to understand how accounting is worked. This essay will analyze the application of accounting in the various situations to reach a conclusion. It will give some perspective for accounting also.
Firm as an accounting object
As we know, accounting was widely used in the firm. In accounting, firm means some business entity aiming at earning economic profit. In general, there are three types of firms: proprietorship, partnership and corporation. Firms are classified by the types of ownership, limitation of liability and so on. According to Scott Besley (2007), a proprietorship and partnership is an unincorporated business. Proprietorship firm owned by one individual while partnership owned by two or more people. A corporation is “a legal entity by a state”. The owners and managers may not be the same person. Corporation have unlimited life and enjoin limited liability. Owners have no responsibility for liabilities of the corporation. However, for proprietorship and partnership, owners must payback all liability of creditor.
Although there are various classifications for firm, its object is quite same. The general object of a commerce firm is earning profit. However, firms cannot just focus on the financial income. There are many other aspects must consider. The firm which is just care about financial achievement will suffer form ethic dilemma. Dobson (1997) defined

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