The role of accounting in contemporary society
Accounting has become an extensive scope and area of presentation in the society. It is not only associated to business system all over the world, but extent in all the sphere of society and in all occupation. Without concerning in earning profit, financial transaction now a day has taken in different social institution and professional activities (Kamla, 2009).
The purpose of this study to examine the role of accounting and financial theories in altering the nature of society, further here is discussing the role and success of accounting in financial markets and the present condition of finance sectors and their impact on capital market (Kamla, 2009).
The reason that accounting deals with financial communication the theories of accounting is established on reasoning. Ball and Brown in 2006, state that theory of accounting have particularly evaluated the importance of accounting with a specific model analysis. This model may involve certain statement or it consists of some arguments. In both of the case, the evaluating method has used to relate with prevailing practices and the further practices implied by the new theories. The fundamental theories related to accounting are design to focus on the theoretical content of accounting (Ball and Brown, 2006).
By these accounting theories you can establish a broad way in forming financial instruction and values in society. It is to be stated that the main objective of financial and accounting theories is to evaluate the financial and accounting information by providing a financial statement, that is useful in establishing business and making perfect financial decision help in rebuilding the society (Freedman, 2015). Moreover, these theories also help in recognizing financial, political, legal and social condition a company function in. It has been evaluated that these accounting theories are accepted need related to historical cost and corresponding principles. Now a day business is assorted in various social and economic problems (HOPWOOD, 2009).
Having knowledge about accounting theory provide an accountant to easily handle all the problems associated with accounting globally. Estimation of different resources and responsibilities has a more or less effect if an accountant has a basic know how regarding accounting theory (freedman, 2015). Generally, these theories provide us to function more specifically about the establishment and use of financial results and their related revelation. Bromwitch (2015) proposed two main theories related to strategic management accounting. One of the theory explains the main aspects of enterprise product that provide profit to the financial sector. This theory states that there is a demand of accountants that pay attention on cost structure not only to their personal organization but work out for related markets and possible applicants (Humphrey et al. 2009).
Role of accounting is common in financial market. This role is intensely concerned in the recent financial problems in order to recapitalize financial organization and reestablishing the stability of financial system in the society (Amolad, 2015). Some new researches have been done in order to evaluate the social and constitutive characters of accounting. This can be done in many ways such as managing micro managerial accounting. It has to be said that the impact of microeconomic and financial accounting has given estimation that financial accounting has a great influence as new financial ideas and its management have now become abundant in the society (Malik, Malik and Shah, 2011).
The power of accounting and its stability are required in various conditions rather than its illustrative ability (Suzuki, 2015). Some of the researches also have done with perspectives regarding Islamic finance and economic condition highlights the social aspects of the accounting. Kamla (2009) find out through his research the prospective of Islamic accounting and learn to work out the critical accounting project to get the emancipatory and permitting way of accounting. By the research of Kamla (2009) it has been said that Islamic accounting theories is distracting from generally declared moral and social characters.
Financial information is vital for the economy of the state. Through this the economic and financial mediators, including experts make the decision (European center bank, 2006). Information of financial accounting is the product of external system of reporting and corporate accounting that extent and widely reveals reviewed and provide quantitative data regarding the economic condition and performance of main organizations (Stiglitz, 1993). It also explains the role of government regarding financial accounting information in order to provide financial data report to promote the well-organized government corporation. The system of financial accounting provides direct contribution for the mechanism of corporate control; in addition they also provide indirect contribution to control mechanism of society by providing information present in stock prices (Stiglitz, 1993).
To maintain the sound organization, financial information also supports market discipline and market confidence (Malik, Malik and Shah, 2011). Moreover, financial information can subsidize well-organized financial intermediation by means of banks, market and other financial institution, along with maintenance of the strength of the financial system by creating some situations in which financial system including market organization, finance markets and finance mediators allow surviving upsets and separation of financial inequities, hence modifying the possibilities in the conflicts of financial mediators (European center bank, 2006).
The role of accounting in finance market is an established debate that has involved economist all across the world. It is also said there is a lack of profit in term of accountancy in the society. On the other hand, the recognized reflection of accountancy is available for the accountant to talk about profit scheme without any explanation. Furthermore, the term profit we used in accountancy provide the accountant some wide views that in what ways the success or failure of any particular trade or cooperate should be evaluate (Simpson, 2000).
In the economy, financial sectors lead a critical role. Their work is highly depending on the economic function of the society. The organization of the financial sector is under inspection because of financial crises and some important changes that are directed (Baily, 2013). Financial sectors for their future success contribute a wide range of products and service that offer all across banking, asset management and insurance companies. They operate worldwide and all across the border market. It is to be believed that financial sector rises and this relate with the public decisions. With this analysis it is concluded that to find out the outcome of the financial system depending upon the financial theories is very hard (Baily, 2013).
To investigate a financial growth of corporate outline of finance associated with number of channels worked by financial market has a great impact on the stability of finance at organization level. It offer information and observing services through which they alleviate the different agency issues of an organization ensuing in evaluation of successful work in the absence of extra required finance (Napier, 2007). The theory of corporate finance proposed that the association among investment and finance at the decline level is because of prescribed inadequacies. It also has been analyses that different financial institution and markets come forward to alleviate the issues of transaction and informational sectors. A study suggested that financial institutions and markets plays two main critical role in the economy, these are distribution of risk capital through saving organization and risk-pooling and distribution and to elevate the liable governance and their management by means of offering investors various mechanisms for observing decision makers (Tadesse, 2000).
It is concluded that the accounting standard play a vital role in contributing growth of the financial market and its stability. Moreover, accounting standards should be in that way that effects the financial statement that may reveal the financial constituents of the contemporary society.
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