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Paper Topic:

Accounting theory

Accounting Theory

Insert Name




08 .05 .09

Introduction to accounting theory

Accounting involves the procedure of identifying , measuring , and recording of the monetary values of the assets and liabilities and assessing these values as they change with time (Beaver , 1981

.152 The financial statement that is used to show the values of assets and liabilities is known as the balance sheet . Business also prepares a statement that is used to show income and expenses of the business and it is known as the

income statement . Profit and loss account is prepared to show profit and loss of the business . Cash flow statement show the flow of cash in and out of the business (Michael et al , 2003

The provision of financial information to users is also known as financial reporting . These financial reports are used by different users to make informed decisions and they include investors , banks , government agencies , management and employees . The investors use the financial statement to make decision on whether to invest or not . Banks and lenders use the financial statements to determine whether to extend credit to the business or not . Government agencies use the financial statement to determine tax liability to be paid by the business Employees use the financial statements to determine whether the business will be able to pay their salaries and wages

These financial statements are prepared in a systematic way . The financial statements need to have some qualities that will make them useful to the users of...

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