THE IMPORTANCE OF KNOWLEDGE IN ACCOUNTING

These include perception, which is the way an individual views something using senses such as ears and eyes, while reasoning is understanding and making sense of information. Introspection, another source of knowledge, involves reflecting on work using interpretations and feelings. Faith refers to using one’s spirits in line with the guidance as for the basis for the formation of decisions. Nonetheless, spirituality lacks proof, and this undermines the use of faith as an important source of knowledge. Memory refers to encoded faculty of the brain, where information is stored. Theories were formulated based on developing arguments on what the researchers idealized the accountants needed to do. The 1970s marked the third period where there were changes to focus more on research and development (R&D).

Studies were only aimed at the explanations and predictions of the accounting practice and not defining a specific approach. A major theory to explain induction is called falsibility which was introduced by Karl Popper. He considered falsifiability as the cornerstone and logical part of the scientific epistemology, where he set the limits in scientific inquiry. The International Accounting Standards Board (IASB) helps in ensuring there is uniformity in interpreting different methodologies in accounting. The roles of a conceptual framework include making prescriptions on the goals of accounting, the definition of accounting elements, and measuring of these elements. It describes the function, limits, and nature of financial accounting and reporting. When there are wrong certainties, which discredit the causes and knowledge of the cycle of POI to recapitulate, it becomes known as hypothesis testing.

This is shown through the falsification concept, where an explanation is used in making speculation which is inclusive. The accounting concepts refer to the rule needed to be followed when preparing statements and every account. There are four main concepts namely the accruals concepts, where the expenses and revenues are recorded when they happen, and not just when the money is paid out or received (Schaltegger, Stefan, and Roger 2017, p. The second concept is consistency, where once there is the selection of an accounting technique, the method has to be applied unless there is a reasonable reason not to do so. The third concept is the going concern, where the business organization must be in good conditions for the continuity of business into the near future.

The final concept is the prudence concept, where profits and revenue are part of the balance sheet only after their realization. Additionally, it only gives descriptions of the present practices and does not form the theoretical base for standards in the future. There are many ways of interpretations. This, alongside the conceptual framework, are proof of the existence of knowledge and the important role it plays in accounting. On the other hand, the “True and fair view” is another proof of the source of knowledge in accounting. The “true and fair” perception in auditing implies that accounting reports faithfully represent the true data, performance, and position of an organization and that they are free from material misstatements. An example is the 2006 Companies Act of the United Kingdom.

This shows the informative nature of accounting. Therefore, auditors must understand the roles of the directors, and whether they have executed them successfully before drafting the “true and fair” statements on finance. This is when they offer their audit opinion. The company law in different jurisdictions needs auditors to expressly claim in their audit report if their financial statements are representations of a true and fair outlook of the fiscal functioning of the organization (Palea 2014, p. Accountants are described as information transmitters, where they are responsible for the provision of information using financial statements. Accounting is defined as the detailed and systematic recording of a business’ assets and liabilities. It is also the process involved in the summer, analysis and reporting these transactions to regulators, tax collection organizations and oversight companies.

These accounting statements, such as the income statements are the summaries of the operations, cash flows of a large company over a specific period of time. It is often known as the language of the business as it communicates a lot of data which the managers, investors, and owners require for the assessment of the performance of assets of an organization. As stated, a conceptual framework refers to the system of objectives and ideas which result in the establishment of a consistent set of standards and rules. The accounting concepts refer to the rule needed to be followed when preparing financial statements and every account. There are four main concepts namely the accruals concepts, where the expenses and revenues are recorded when they happen, and not just when the money is paid out or received.