UNDERSTANDING ACCOUNTING THEORY
UNDERSTANDING ACCOUNTING THEORY
Financial accounting discusses how procedures, methods, and techniques for recording financial transactions are carried out to achieve the stated financial reporting objectives. Accounting standards provide guidelines (definition, measurement, assessment, recognition, and disclosure of elements or items of financial statements) accounting treatment of an event.
Accounting that is practiced in a country actually does not just happen scientifically, but the practice that is carried out is designed and developed intentionally to achieve certain social goals. And accounting practices are influenced by environmental factors (social, economic, political). Therefore, the structure and practice of accounting will differ from one country to another (the difference arises because the structure and practice is adapted to the conditions of the country, where the accounting is carried out).
In this chapter, accounting theory will discuss alternative treatments and models that can be an answer to the problems faced in accounting practice. Good and advanced practice cannot be achieved without a good theoretical foundation. Therefore practice and profession must be developed on the basis of reasoning.
Accounting Development
Accounting is seen as the implementation and application of standards to prepare a set of financial statements. From a professional or practitioner point of view, accounting is concerned with the "how" aspect. Generally accepted accounting principles (GAAP) are guidelines that are broader than accounting standards because not all accounting treatments are explicitly regulated in accounting standards. GAAP contains accounting standards plus other reference sources that are supported in force.
On the other hand, as an object of knowledge in universities. Academics view accounting as two fields of study, namely the field of practice and theory. Thus accounting education in universities must be able to change accounting practices that are carried out for the better. However, in reality, the teaching process in higher education cannot always be carried out due to various factors.
The Role of Accounting Research
Accounting practice will experience rapid and satisfactory development if there is an interaction between three aspects, namely: research, teaching, and practice.
As for the new ideas that arise for the development of practice must be research and discussion material at the academic level so that alternative practices are produced that can be a solution if problems occur in practice.
Financial Reporting Engineering
Engineering is a planned and systematic process that involves thinking, reasoning, and consideration to select and determine theories, available knowledge, concepts, methods, techniques and approaches to produce a product.
In engineering financial reporting, accounting utilizes knowledge and science from various disciplines. Accounting objectives will be a driving force in engineering accounting because these objectives will be used to evaluate the usefulness and effectiveness of the resulting product.
Accounting Theory As Science
Accounting theory is often interpreted as a set of accounting principles that apply and must be adhered to in a particular environment.
Understanding theory is a set of interrelated concepts, definitions, and propositions. Theory contains statements of assumptions and hypotheses. And the purpose of the theory itself is to explain (analyze and give reasons why phenomena or facts as observed) and predict (provide confidence that the assumptions or conditions being theorized are likely to be a certain phenomenon or event that will occur).
If this understanding is applied to accounting, accounting theory is often intended as an independent science that is the source or parent of accounting knowledge and practice. Therefore, accounting theory contains the overall analysis and its components which become a reference source for explaining and predicting phenomena or events in accounting.
Because accounting theory is equated with science, what is discussed by this theory must meet the criteria of science, namely value-free, coherent, universal, and empirically testable.
Accounting Theory as Logical Reasoning
Accounting theory is referred to as logical reasoning because it can provide explanations and reasons for certain accounting treatments (either according to accounting or according to tradition) and about the accounting structure that applies in a particular area.
Aspects of Target Theory
The target aspect of this accounting theory is the differentiation of accounting theory into positive accounting theory (containing statements about an event, action, or deed as it is in accordance with facts on an empirical basis) and normative (containing statements and reasoning to judge whether something is good or bad or not). relevant or irrelevant in relation to a particular economic or social policy.
Positive explanations are directed to give an answer whether a statement is true or false on scientific grounds. Normative explanations are directed to support or produce political policies so that they are policy-making.
Aspects of the Semiotic Level
Semiotics is a field of study that discusses the general theory of signs and symbols in the field of linguistics (a field of linguistic study that discusses phonetics, grammar, morphology, and the meaning of words or expressions). Signs or symbols of language and grammar form language expressions that become a medium of communication.
Semantic Accounting Theory
This semantic accounting theory emphasizes the discussion on the problem of symbolizing the real world or reality into signs of accounting language (financial statement elements) so that people can imagine activities. Therefore, this theory discusses a lot about defining the meaning of elements, identifying attributes or characteristics of elements as defining material, and determining the rupiah amount of an element as one of the attributes.
Syntactic Accounting Theory
Syntactic accounting theory is a theory that is oriented to discuss issues about how company activities that have been symbolized semantically in financial elements can be realized in the form of financial statements. These symbols (eg assets, liabilities, etc.).
Syntactic theory includes the relationship between the elements that make up the financial reporting structure or accounting structure in a country, namely management, reporting entities, information users, accounting systems, and reporting preparation guidelines.
Pragmatic Accounting Theory
This theory focuses on the effect of information on changes in the behavior of report users. In other words, this theory discusses the reaction of the parties to whom accounting information is addressed.
Pragmatic theory also discusses various issues and problems related to testing the usefulness of information both in the context of external and managerial financial reporting. The pragmatic theory contains a lot of theory tests about the relationship between accounting variables and changes or differences in user behavior.
Deductive Reasoning
Deductive reasoning is an inference process that starts from an agreed general statement (called a premise) to a specific statement as a conclusion. Deductive reasoning in accounting is used to provide explanations to support the feasibility of an accounting statement.
Inductive Reasoning
Inductive reasoning is a process that begins with a particular statement or situation and ends with a general statement which is a generalization of the particular situation. Inductive reasoning in accounting is generally used to produce general statements that explain the accounting phenomena.
In practice, inductive reasoning in accounting cannot be carried out separately from deductive reasoning, because the two reasoning are interrelated.