Accounting Ðnvironmеnt

It is a concentrated challng to maintain sight of news report-spcific topics whil studying accounting in th rich and complx socio-conomic contxt in which it occurs. In an attmpt to mt th challng, th focus of th accounting cycl is to (1) idntify charactristics that mak accounting nurture uniqu and (2) undrstand how accounting is don, and study how that may b a consqunc of how accounting is usd. (Paton and Littlton, 1989)As xampls of th first proprty, accounting data is aggrgatda small desensitizer of accounts summariz th information containd in a larg muffler of transactions. It is pr equatingd in accordanc with doubl-ntry ruls. It is auditd. It is leashd ovr multipl priods. It givs th prparr of accounting rports a curious amount of discrtion (through th choic of accruals). Th accounting cycl also strsss that accounting information ofttimesn works bst whn usd in conjunction with othr information.( Horngrn, Fostr and Datar, 2000)First th accounting cycl is prsntd in its normal s qunc. That is, start with transactions, writ daybook ntris, post to T-accounts, and prpar fiscal statmnts. Whil this procss maks us of doubl ntry, it is unclar why doubl ntry is bing usd. To dv trim back a bttr apprciation for th powr and bauty of doubl ntry, on turns to rvrs nginring. That is, start with financial statmnts and driv transaction amounts that could hav gnratd th statmnts. Working backward to uncovr transactions (th invrting xrcis) complmnts th mor traditional approach of working forward from transactions to financial statmnts.Othr proprtis (and advantags) of doubl ntry privy thn b xplord. First, it allows for a convnint rprsntation of information rtaind and supprssd during th accounting cycl. Scond, it allows for a ocular-dirctd graph rprsntation, which maks som wll-known ntwork flow rsults accssibl. (Paton and Littlton, 1989)An application of ths rsults is prsntd in th contxt of auditing. In fact, th auditing xampl lnds som illumination as to why accounting, and n ot othr information sourcs, is auditd. Th ky over again turns out to b doubl ntry.An advantag of th invrtibility xrcis is that it allows accss to, and rlativly transparnt applications of, a numbr of thorms in applid mathematicsmatics. Th invrting procss is, aftr all, solving a systm of linar quations and inqualitis, a systm givn a spcial structur by doubl-ntry mchanics. xampls of thorms ncountrd ar th thorm of th sparating hyprplan, th duality thorms of linar programming, th scoop flow-min cut algorithm, and projction thorms. (Horngrn, Fostr, and Datar, 2000)Applying th thorms in a doubl-ntry contxt typically allows a convnint visual rprsntation vn of high-dimnsion problms. Aggrgation is a prvasiv thm in accounting. It occurs in managrial accounting txtbooks, cost accounting, tax accounting, and financial accounting. This cours bgins by introducing dcision problms in which th cost of aggrgation is xplicitly dtrmind. Th cours can thn talk about sttings in which aggrgation is actua lly dsirabl.A furthr advantag of th visual rprsntation is that unhomogeneous invrtibility xrciss can b conductd on publishd financial statmnts. This is a convnint mode to nsur that ral-world financial statmnts (and vry lin itm thrfrom) ar an important part of th discussion. (Paton and Littlton, 1989)Gnralizing th thorms byond a doubl-ntry contxt allows accss to othr rlatd problms and rsults. For xampl, gnral quilibrium and th wlfar thorms of conomics can b discussd in a smi-rigorous fashion in th contxt of a linar production conomy.RfrncsHorngrn, C., G. Fostr, and S. Datar. (2000). exist account. Uppr Saddl Rivr, NJ Prntic Hall. Paton, W., and A. Littlton. (1989). An Introduction to Corporat Accounting Stan.. dards. Sarasota, FL Amrican Accounting Association.