FASB ASC Tutorial & Solutions Manual for
Accounting Theory and Analysis (14th Edition) –
Schroeder, Clark & Cathey
Is Accounting a Science or an Art? - answers-Accounting can be considered both a science and
an art:
->SCIENCE in the sense that it's a field of knowledge that contains a coherent system of
interrelated objectives and fundamental concepts that prescribes the nature, function, and
limits of financial accounting and reporting and that is expected to lead to consistent guidance
(see, definition of the Conceptual Framework).
->However, it is also an ART in the sense that there are SKILLS and BASIC KNOWLEDGE that
accountants must possess and APPLY to SOLVE ACCOUNTING PROBLEMS.
THE CONCEPTUAL FRAMEWORK:
As the FASB states... - answers-"The Conceptual Framework is a coherent system of
interrelated objectives and fundamental concepts that prescribes the NATURE, FUNCTION, and
LIMITS of financial accounting and reporting and that is expected to lead to consistent
GUIDANCE.
It is intended to serve the public interest by: providing STRUCTURE and DIRECTION to financial
accounting and reporting to FACILITATE the provision of UNBIASED financial and related
INFORMATION."
ACCOUNTING THEORY can be defined as: - answers-A set of PRINCIPLES that:
1) Provide a general frame of reference by which accounting practice can be evaluated -AND-
2) Guide development of new practices and procedures (Hendrick)
1
, OR
A cohesive set of conceptual, hypothetical and pragmatic propositions explaining and guiding
the accountant's action in identifying, measuring and communicating economic information.
(AAA)
NATURE OF THEORY - answers--->Theory is often viewed as a set of GENERAL PROPOSITIONS,
used as principles for Explaining apparent Relationships among certain Observed Phenomena,
events or things.
-->Theory is used as basis for Explaining how/why certain phenomena happen the way they do.
-->EXPLANATIONS, as well as PREDICTIONS by theory are important as they enhance our
understanding of outcomes & phenomena.
-->Generally theory is sometimes said to deal with the creation of scheme of ideas which
provide definition of the problem observed and the understanding of it.
-->PROPOSITIONS are statements concerned with: - answers-relationships among CONCEPTS
-->A CONCEPT is - answers-a generalized idea or expression in words about events observed in
the real world.
The Objective & Need of ACCOUNTING THEORY: - answers-To provide a basis for PREDICTION
and EXPLANATIONS of accounting behaviors and events and help to understand current
development in accounting practice.
*Provide general frame of reference by which accounting practice can be evaluated.
2
Accounting Theory and Analysis (14th Edition) –
Schroeder, Clark & Cathey
Is Accounting a Science or an Art? - answers-Accounting can be considered both a science and
an art:
->SCIENCE in the sense that it's a field of knowledge that contains a coherent system of
interrelated objectives and fundamental concepts that prescribes the nature, function, and
limits of financial accounting and reporting and that is expected to lead to consistent guidance
(see, definition of the Conceptual Framework).
->However, it is also an ART in the sense that there are SKILLS and BASIC KNOWLEDGE that
accountants must possess and APPLY to SOLVE ACCOUNTING PROBLEMS.
THE CONCEPTUAL FRAMEWORK:
As the FASB states... - answers-"The Conceptual Framework is a coherent system of
interrelated objectives and fundamental concepts that prescribes the NATURE, FUNCTION, and
LIMITS of financial accounting and reporting and that is expected to lead to consistent
GUIDANCE.
It is intended to serve the public interest by: providing STRUCTURE and DIRECTION to financial
accounting and reporting to FACILITATE the provision of UNBIASED financial and related
INFORMATION."
ACCOUNTING THEORY can be defined as: - answers-A set of PRINCIPLES that:
1) Provide a general frame of reference by which accounting practice can be evaluated -AND-
2) Guide development of new practices and procedures (Hendrick)
1
, OR
A cohesive set of conceptual, hypothetical and pragmatic propositions explaining and guiding
the accountant's action in identifying, measuring and communicating economic information.
(AAA)
NATURE OF THEORY - answers--->Theory is often viewed as a set of GENERAL PROPOSITIONS,
used as principles for Explaining apparent Relationships among certain Observed Phenomena,
events or things.
-->Theory is used as basis for Explaining how/why certain phenomena happen the way they do.
-->EXPLANATIONS, as well as PREDICTIONS by theory are important as they enhance our
understanding of outcomes & phenomena.
-->Generally theory is sometimes said to deal with the creation of scheme of ideas which
provide definition of the problem observed and the understanding of it.
-->PROPOSITIONS are statements concerned with: - answers-relationships among CONCEPTS
-->A CONCEPT is - answers-a generalized idea or expression in words about events observed in
the real world.
The Objective & Need of ACCOUNTING THEORY: - answers-To provide a basis for PREDICTION
and EXPLANATIONS of accounting behaviors and events and help to understand current
development in accounting practice.
*Provide general frame of reference by which accounting practice can be evaluated.
2
