Why do we need so many different theories in accounting Essay - 1

Why do we need so many different theories in accounting - Essay Example It is therefore essential that this information is recorded and reported in such a way that it holds value for all its users. In this paper framework for accounting profession including different accounting theories would be discussed. Furthermore, an illustration of different accounting treatment based on different accounting approaches is also made in this paper. The accounting profession is based on values and conceptual framework that has been developed over the years. This conceptual framework incorporates different well established theories and principles which determine the methodology for recognising, measuring and recording of the company’s assets and liabilities. The framework also allows logical reasoning for addressing different accounting and financial issues and provides guidelines for incorporating the information related to these issues in the financial records. This ensures that a uniform approach could be applied to different classifications of assets and liabilities and the information that has been produced and verified can be depended upon for decision making. An accounting theory defined as â€Å"a coherent set of hypothetical, conceptual and pragmatic principles forming a general frame of reference for enquiring into the nature of accounting†(Hendriksen & Breda, 1992) therefore could be suggested to provide the necessary concepts, framework, principles, procedures, rules and regulations. Another way of looking at accounting theories is that they allow predicting accountants’ behaviour and provide basis for coherent accounting treatment of assets and liabilities. There are numerous accounting theories suggesting that there is no single comprehensive of accounting. They could be categorized into three broad areas that are 1) those providing explanation of accounting practices 2) those providing forecasts or predictions of impacts of future