Accounting Theory - Paper

Contents Executive Summary 1 Introduction 2 Theories of Accounting 2 Public Interest Theory 2 Private Interest Theory 2 Regulatory Capture Theory 3 Is accounting Needed (GPFR)? 3 What does the financial department (accounts) do? 3 Why public disclosure became so serious? 4 Principal Agent Outlook 4 Agency Cost- Critical Reason for accounting frauds 6 Three Essential Accounting Areas 7 Capital Budgeting 7 Investments 9 Capital Structure 11 Trade off theory 12 Conclusion 13 References: 15

Executive Summary
In this paper our objective is to understand the concept and theories of accounting. The paper explores public interest theory, private investment theory and regulator capture theory. After this our paper focusses on three key accounting areas. These areas are capital budgeting, capital structure and various investments made by the company. This will help us evaluate how the structure of accounting helps in these public disclosures. We also look into General Purpose Financial Reporting (GPFR) and whether at it is important for accounting world. In our analysis we came out with a conclusion that GPFR is actually important, because its keeps all the stakeholders of the current condition of the company.

Introduction
In this paper we look at various theories about accountancy. We also look at how these theories have shaped up the accounting world. We analyses this on the basis of few critical business decisions. These decisions are capital budgeting, capital structure & various investments based by the company. We have chosen these three areas on our paper as these are the ones which are very critical to any business decision in the financial world. These three factors impact the accounting and its methodology the most. We also have a look at GPFR (general purpose financial reporting). This gives us the insight whether at all GPFR is necessary in business world. (Harris, 1998)
Theories of Accounting
Public Interest Theory

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