Is it time for us to abandon the accruals concept of accounting?
The development of permanently invested capital (in the 17th century) gave rise to the need to split the life of a business enterprise into artificial accounting periods so that a return could be made to shareholders (Littleton, 1933). This gave rise to the definition of accounting as the allocation of historical costs and revenues to current and succeeding fiscal periods (American Accounting Association, 1936,).
However, the recent example of Tesco plc, which has been accused of over stating profits by 250m by wrongly exploiting timing differences, makes some commentators say that this system is too easy to manipulate and is not providing useful or reliable information to shareholders.
Write an essay, using appropriate academic sources and commercial examples, which show the arguments both for and against an accruals concept of accounting.
Conclude with a clear statement of your own position based on the arguments you have presented.
The development of permanently invested capital (in the 17th century) gave rise to the need to split the life of a business enterprise into artificial accounting periods so that a return could be made to shareholders (Littleton, 1933). This gave rise to the definition of accounting as the allocation of historical costs and revenues to current and succeeding fiscal periods (American Accounting Association, 1936,).
However, the recent example of Tesco plc, which has been accused of over stating profits by 250m by wrongly exploiting timing differences, makes some commentators say that this system is too easy to manipulate and is not providing useful or reliable information to shareholders.
Write an essay, using appropriate academic sources and commercial examples, which show the arguments both for and against an accruals concept of accounting.
Conclude with a clear statement of your own position based on the arguments you have presented.
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