Conventional accounting essay

How to Write a Summary of an Article? Manufacturing account, the term I use to describe business organizations engaged in the manufacture of goods for sale. Expenses are the cost of unsold products and are reported as assets.

Conventional accounting essay

At the same time, it should be said that innovations are implemented relatively slowly in accounting compared to other fields of economy. Nevertheless, nowadays it is obvious that changes are inevitable and, in such a situation, it is quite natural that such specialists as Henderson estimate that accounting is not just a process of passive score-keeping, the results of which are announced, dealt with and forgotten.

In fact, such an approach is the characteristic of the traditional accounting systems and theories because traditionally, accounting is considered to be a very conservative field and, as a rule, specialists prefer to implement traditional approaches to accounting.

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In this respect, it should be said that one of the most widely spread accounting theories, which is based on traditional and conservative approaches to accounting, is normative accounting. Basically, normative accounting implies the pure score-keeping with the analysis of data and development optimal accounting standards to enhance the performance of a company.

On analyzing nominative accounting, it should be said that Conventional accounting essay approach can hardly be named effective, especially nowadays, because it does not really deals with the current trends, analysis of perspectives of a company in the context of the development of the particular industry.

Instead, nominative accounting is very conservative and based on principles of traditional counting.

CHAPTER 4: CRITIQUE OF CONVENTIONAL ACCOUNTING

However, it does not necessarily mean that this approach is absolutely unacceptable because it is a bit out of date. In fact, this system may be quite reliable and provide positive results but, nevertheless, such an approach does not fully reflect the current economic Conventional accounting essay and it does not match new demands these trends imposes on accounting.

This means that, in actuality, accounting system should be more flexible and open to changes and implementation of innovations which could potentially enlarge the capabilities and functionality of accounting system distancing from traditional book-keeping and involving new spheres where accounting has never played significant role in the past.

In this respect, it is possible to refer to positive accounting as a new, more contemporary and more advanced approach to accounting.

It should be said that this approach is absolutely different and even contrast to normative accounting. In fact, this approach attempts to overcome the conventional frontiers of accounting and look further in the future of accounting practices.

Unlike, normative accounting, positive accounting tends to the prediction of the future development of accounting and company at large that makes this approach very useful for the company because it increases the forecasting potential of the analytical unit of the company.

Basically, positive accounting is associated with the contractual view of organizations. In such a context, a organization is viewed as a nexus of contracts and accounting one tool to facilitate the formation and performance of contracts.

According to this approach, accounting practices evolve to mitigate contracting costs establishing an agreement among varying parties. It is worthy of mention that positive accounting postulates that conservatism in accounting, i. For instance, absent conservatism, managerial compensation agreements may reward managers based on current reports that later evidence indicate were unwarranted.

However, it is worthy of mention that the contractual view of positive accounting puts it in tension with value relevance studies in accounting. In such a way, positive accounting is considered to be more perspective compared to traditional forms and approaches to accounting.

As the matter of fact, positive accounting is more focused on the forecasting and evaluation of the value of the organization that is nowadays extremely important since it contributes substantially to the improvement of the analytical power of accounting.

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In such a situation, accounting may be used to improve the current strategy used by a company and adapt it to the actual needs of the company. What is even more important is the fact that positive accounting overcomes the conventional frontiers of accounting and makes it very helpful for the general development of the company.

In fact, positive accounting may be viewed as a perfect alternative to conservative traditional accounting-book-keeping, which has been criticized byHendersonbecause it meets the modern demands to accounting.

Thus, traditional accounting systems and theories are not very effective nowadays and need to be improved in order to make them more effective and to facilitate the functioning of companies. In this respect, it should be said that traditional approaches such as normative accounting will gradually give in to more progressive approaches such as positive accounting.

In addition, it is important to remember about the growing integration of American companies and not-for-profit organizations into international cooperation. To put it more precisely, a large number of American organizations operate internationally. Therefore, they need the introduction of new, universal standards that will be acceptable worldwide.

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Conventional accounting essay

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CHAPTER 4: CRITIQUE OF CONVENTIONAL ACCOUNTING