Abstract
The purpose of this introductory chapter is to attempt to provide the reader who is new to accounting with an idea of what accounting is about:
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What is its importance in society?
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What problems is it concerned with?
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What methods are adopted to solve these problems?
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Notes and References
American Accounting Association ‘A Statement of Basic Accounting Theory’ (American Accounting Association, Evanston, Illinois) 1966).
For further discussion of the rights of users and the accountability of business, see ‘The Corporate Report’ (Accounting Standards Committee, 1975).
A report on accounting standards proposed that policy should be determined by ‘a wide constituency of interests ... to guide ... on issues of public concern ... and to act as a powerful proactive public influence for securing good accounting practice’, The Making of Accounting Standards’ (The Dearing Report) (London: ICAEW 1988).
These statements have been the pre-dominant means of presenting accounting information throughout the world during the nineteenth and twentieth centuries; suggestions for their amendment or replacement have been made from time to time. The content of this book assumes that they will continue to be used, at least in the foreseable future.
A more formal definition of the elements which make up a balance sheet is given in the statement issued in 1989 by the International Accounting Standards Committee (IASC), ‘Framework for the preparation and presentation of financial statements’:
An asset is a resource controlled by the enterprise as a result of past events and from which future economic benefits are expected to flow to the enterprise.
A liability is a present obligation of the enterprise arising from past events, the settlement of which is expected to result in a flow from the enterprise of resources embodying economic benefits.
Equity is the residual interest in the assets of the enterprise after deducting all its liabilities.
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© 1991 Arthur Hindmarch and Mary Simpson
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Hindmarch, A., Simpson, M. (1991). Introduction to Accounting. In: Financial Accounting: An Introduction. Palgrave, London. https://doi.org/10.1007/978-1-349-21765-6_1
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DOI: https://doi.org/10.1007/978-1-349-21765-6_1
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