Chapter 4 - Solution Manual

Critical perspectives proponents also argue that

Info icon This preview shows pages 8–10. Sign up to view the full content.

View Full Document Right Arrow Icon
provides information that is representationally faithful and therefore objective. Critical perspectives proponents also argue that accounting has been unduly influenced by utility based, marginalist economics. That is, the profit motive is all that matters. This viewpoint overlooks many other goals of business organizations, such as social goals. In addition they argue that accountants aid profit oriented groups to the detriment of others. Critical perspectives proponents view organizations in both a historic and a societal context. Accordingly, accounting should serve the good of society as well as business organizations. It should concern itself with the powerful multinational corporation and how these corporations affect the benefits received by and the costs to society. For example, accounting reports should provide information regarding the social costs of polluting the environment. Team 2 Arguments supporting traditional mainstream accounting research Traditional mainstream accounting research is concerned with unbiased, objective reporting of results of economic transactions and events. Accounting serves a stewardship function for investors, creditors and other users. Because the modern corporation is characterized by separation of management and ownership, accounting has a responsibility to owners to report how management has utilized the resources entrusted to it and how the company has actually performed during the accounting period. Accounting does have a duty to society. But, that duty is not to try to cause corporations to provide benefit to the society at large. Rather, in a free market economy, business serves society by providing goods and services to the public. In return, business provides a return to owners, jobs for societies people, and profits to other businesses by buying goods and services from them. It is the accountant's job to report on these activities so that users of accounting information can assess the value of the company. It is not the accountant’s job to pass judgment on the activities themselves or to bias reporting so that a societal goal can be reached. Debate 4-3 Positive versus normative accounting theory Team 1Support reliance on positive theory to develop a general theory of accounting
Image of page 8

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
73 Proponents of the positive theory of accounting maintain that it provides a description of existing accounting practice. In fact, this theory has arisen because existing theoretical constructs do not fully explain accounting practice. Stated differently, positive theory explains what is, rather than what should be. Thus, it can be used to explain why companies make the accounting choices that they do. Positive accounting can be associated with the contractual view of the firm in which accounting practices have evolved to mitigate contracting costs by establishing agreement among varying parties. For example, a positivist would say that conservatism has origins in the contract markets, including managerial compensation contracts and lender debt contracts. To prove their point, one would argue
Image of page 9
Image of page 10
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern