Question

1. Discuss in brief the history of Accounting Thought.

2. a) Define the FASB's Conceptual Framework of Accounting. What are the objectives of financial reporting?
b) Discuss the Qualitative Characteristics of Accounting Information.

3. Discuss The proprietary Theory, Entity Theory, Residual Equity Theory, Enterprise Theory and The Fund Theory of the theoretical concepts of accounting theory.

4. Discuss the concept of income. Distinguish between accounting concept of income and economic concept of income.

5. Explain Accounting Postulates. Discuss in brief The Postulates of Accounting Theory.

Answer 1

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1. The history of accounting or accountancy can be traced to ancient civilizations. The early development of accounting dates back to ancient Mesopotamia, and is closely related to developments in writing, counting and money and early auditing systems by the ancient Egyptians and Babylonians
2. a )The conceptual framework is supposed to embody “a coherent system of interrelated objectives and fundamentals that can lead to consistent standards and that prescribes the nature, function, and limits of financial accounting and financial statements.”2 The conceptual framework is an attempt to provide a metatheoretical ... Qualitative characteristics of accounting information B ) Relevance: information makes a difference in decision making. Reliability: information is verifiable, factual, and neutral. Comparability: information can be used to compare different entities. Consistency: information is consistently presented from year to year.
3. 1. Proprietary Theory:Under the proprietary theory, the entity is the agent, representative, or arrangement through which the individual entrepreneurs or shareholders operate.The following points highlight the top five theories of equity. The theories are: 1. Proprietary Theory 2. Entity Theory 3. Fund Theory 4. Residual Equity Theory 5. Enterprise Theory.
4. Accounting income or loss recognizes realized gains and losses, and does not recognize unrealized gains and losses. Economic income or loss recognizes all gains and losses, whether realized or unrealized.
5. An accounting postulate is an assumption in the field of accounting based on historical practice. Accounting postulates form the basis of the accounting standards that govern how transactions are treated and recorded.