Concept of Accounting Theory - Solution is Just a Click Away

Questions: 1. Explain why principles-based standards require a conceptual framework. 2. Why is it important that the IASB and FASB share a common conceptual framework? 3. It is suggested that several parties can benefit from a conceptual framework. Do you consider that a conceptual framework is more important for some parties than others? Explain your reasoning. 4. What is meant by a 'cross-cutting' issue? Suggest some possible examples of crosscutting issues.| Answers: (1). A principle based standard shall be required to develop the conceptual framework for establishing financial standards as well as financial accounting. The objective is based on the basis of financial as well as the operational standards of a business enterprise. These standards are required are based on the long term objectives, organizational characteristics of a business enterprise. To be dependent on principles, the conventions shall be based on fundamental business concepts. [1] Without any presence of strong principles, there would not be any guidelines relating to the recording of accounting transactions in a business enterprise. The principles help to reduce any issues pertaining to any financial discrepancies that might have been hampering the commercial viability of a business enterprise. The FASB and the IASB have been able to follow a strict guideline in developing projects of short term as well as the long term. These institutions have been able to follow a standard guideline and have a common purpose relating to the financial stability of a business enterprise. These principles shall assist a business enterprise in preparing financial statements as per the internationally accepted accounting standards. In this regard, it can be said that the purpose behind these principles is to re-innovate, re-define as well as update the accounting standards to reduce any errors that might have crept in the year ended financial statements. In addition, these reflect comparison with the past years financial position to make important alterations in the existing financial position of the business enterprise. (2). It is important that IASB and the FASB have a common framework. This shall assist the organization to have a common purpose in regarding the financial statements of a business enterprise. This can be done in regard to the preparation of financial statements of a business enterprise. This helps to reduce the hazards in preparing year ended annual financial statements in a vulnerable market environment. If the IASB and FASB converges their standards, this shall create a unified framework and guidelines for the preparation of financial statements in the year end.[2] However, it can be said that the IASB as well as the FASB shall not be successful, if these standards are based on the current FASS concept statements and the IASB Framework. Thus, these documents shall require changes to suit the present working environment. It can be stated that the joint project would help to identify the issues that has been hampering the hampering the development of standard setting projects in various ways. The cost-cuttings procedures have been an essential tool to assist reputed corporate houses in their growth. These two boards shall work together to address a range of issues that has led to the financial statements being ineffective. It is estimated that the joint partnership of these two boards have led to the development of accounting and financial that has facilitated the development of these two issues in a business enterprise. This has led to the development of standard level financial procedures that has been useful to corporate houses, in the context of the global market. (3). A uniform financial framework shall help in the development of effective financial statements in any business enterprise. The allocation of fixed and variable expenses shall have a definite procedure to guard against the perils of financial irregularities. The uniform financial framework is based on strong financial base that shall conform to rules and regulations of business enterprise. Thus, a single party shall not benefit when implementing a conceptual accounting framework. [3]Every legal business entity shall benefit from the transparency and honesty of the accounting statements prepared in the business enterprise. (4). The concept of cost cutting relates to the issue of cost-reduction in the accounting procedures of a business enterprise. It helps assist a business enterprise to reduce the operational expenses of a business enterprise. In addition, the conceptual framework provides the necessary guidelines that help assist a business enterprise to reduce the operational expenses, thereby, leading the business enterprise to gain a profitable position in an intensely competitive market.[4] The cost cutting procedures provides the necessary guidelines to implement reduction in the cost cutting procedures of a business enterprise. The following are the suitable measures that can assist any business enterprise to reduce the manufacturing or the production expenditures of a business enterprise. Process optimization - The procedure of process optimization helps to reduce unnecessary wastage of time and resources in a business organization. As such, the operational processes are planned in a way to enhance production in terms of both quality and quantity with little time and effort. Workforce optimization - By implementing a demand - calibrated against a capacity utilization procedure, a business enterprise would be able to emphasize on the requirements of the workforce and guard against unusual labor expenditures. Thus, effective reduction of overtime expenditures shall enable a business enterprise to assess the workforce requirements adequately and decrease the lab our costs. A less overtime expenses can emerge as a source of savings for the business enterprise. Energy requirements - The purpose of energy requirements since it is an essential manufacturing cost that a business enterprise has to bear. As per market experts , it is the highest or the second most element in a manufacturing process that has a potential expenditure towards the organization . By adopting effective demand driven policies, the operational processes of the organization shall be effective. This would also help the organization to save energy costs without hindering the process of offering effective customer service and the volume of output. Expenditures related to the regulatory compliances - The process of adhering to the regulatory compliances can incur considerable financial expenditures. [5]Thus it can be is the prime responsibility of the manufacturing department to strictly adhere to the rules and regulations of the operational policies of a business enterprise. References Baker, C. Richard, and Alain Burlaud. "The Historical Evolution from Accounting Theory to Conceptual Framework in Financial Standards Setting." The CPA Journal 85.8 (2015): 54. Barthel, Laura. "Prevalence of Accounting Theory in Top-Ranked Undergraduate Accounting Programs." Journal of Accounting and Finance14.4 (2014): 135. Baxter, William T. Accounting theory. Routledge, 2014. Bonin, Holger. Generational accounting: theory and application. Springer Science Business Media, 2013. Deegan, Craig. Financial accounting theory. McGraw-Hill Education Australia, 2013. DRURY, COLIN M. Management and cost accounting. Springer, 2013. Gaffikin, Michael, and Michael Aitken. The Development of Accounting Theory (RLE Accounting): Significant Contributors to Accounting Thought in the 20th Century. Routledge, 2014.