Test Bank for Financial Accounting Theory and Analysis, 14th
ki ki ki ki ki ki ki ki
Edition by Richard G. Schroeder
ki ki ki ki ki
,
,6.The purpose of Statements of Financial Accounting Concepts is to
kiju kiju kiju kiju kiju kiju kiju kiju kiju
a. Form a conceptual framework for solving existing and emerging problems.
kiju kiju kiju kiju kiju kiju kiju kiju kiju
b. Determine the need for FASB involvement in an emerging issue. kiju kiju kiju kiju kiju kiju kiju kiju kiju
c. Establish GAAP. kiju
d. Modify or extend an existing FASB Accounting Standards Update.
kiju kiju kiju kiju kiju kiju kiju kiju
Answer a kiju
Essay
7.Discuss the contributions of Paton and Canning to the development of accounting
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
theory.
kiju
The first attempts to develop accounting theory in the United States have been attributed to
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
William
kiju
A. Paton and John B. Canning. Paton’s work, based on his doctoral dissertation, was
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
among the first to express the view that all changes in the value of assets and
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
liabilities should be reflected in the financial statements, and that such changes
kiju kiju kiju kiju kiju k
ju
i kiju kiju kiju kiju kiju kiju
should be measured on a current value basis.
kiju kiju kiju kiju kiju kiju kiju kiju
He also maintained that all returns to investors (both dividends and interest) were
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
distributions of income, and consequently he espoused the entity concept rather
kiju kiju k
ju
i kiju kiju kiju kiju kiju kiju kiju kiju
than the prevailing proprietary concept. An additional contribution of this work
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
was an outline of what Paton believed to be the basic assumptions or postulates
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
underlying the accounting process. Paton’s basic assumptions andpostulates can be
kiju kiju kiju kiju kiju kiju kiju kiju k
ju
i kiju kiju
viewed as the first step in the development of the conceptual framework of
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
accounting. Canning’s work suggested a framework for asset valuations and
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
measurement based on future expectations as well as a model to match revenues and
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
expenses.
kiju At this time, the balance sheet was viewed as the principal financial
k i j u kiju kiju kiju kiju k
ju
i kiju kiju kiju kiju kiju kiju
statement, and the concept of capital maintenance wasjust emerging.
kiju kiju kiju kiju kiju kiju kiju kiju k
ju
i kiju
8.Discuss the contribution DR Scott to the development of accounting theory.
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
During this early period, significant contributions to the development of a
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
conceptual framework of accounting were also made by DR Scott. Scott was viewed
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju k i j u kiju kiju
as an outsider; however, his writings have proven to be quite insightful. Scott was
kiju kiju kiju kiju kiju kiju k
ju
i kiju kiju kiju kiju kiju kiju kiju
originally trained as an economist and was heavily influenced by the views of his
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
colleague, the economist and philosopher Thorstein Veblen. He adopted Veblen’s
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
view that many academics were overly occupied with refining the details of
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
existing theories when there was a need for the reexamination of fundamental
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
assumptions. Both Scott and Veblen viewed the Industrial Revolution as changing
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
the fundamental fabric of our society. Scott believed the Industrial Revolution
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
caused managers to look for new methods of maintaining organizational control. As a
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
result, scientific methods such as accounting and statisticsbecame organizational control
kiju kiju kiju kiju kiju kiju kiju kiju k
ju
i kiju kiju
tools.
kiju
, Scott contributed to the development of accounting theory by recognizing the need for a
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
normativetheory of accounting. This view, described in several publications from 1931
kiju k
ju
i kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
to 1941, evolved into a description of his conceptual framework in “The Basis for
kiju kiju kiju kiju k
ju
i kiju kiju kiju kiju kiju kiju kiju kiju kiju
Accounting Principles.
kiju kiju
In his first important work, The Cultural Significance of Accounts, Scott argued that
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
accounting theory was not a progression toward a static ideal but rather a process of
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
continually adapting to an evolving environment. The notion of adaptation later
kiju kiju kiju kiju k
ju
i kiju kiju kiju kiju kiju kiju
became one of Scott’s principles in his conceptual framework. He approached
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
accounting from a sociological perspective. The basic premise presented in Cultural
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
Significance was that the economic basis of any culture is shaped by the institutional
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju k
ju
i kiju
superstructure of the society in question. This view later evolved into his
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
orientation postulate.
kiju kiju
Scott’s next important work was a response to the American Accounting
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
Association’s “A Tentative Statement of Principles Underlying Corporate Financial
kiju kiju k
ju
i kiju kiju kiju kiju kiju kiju
Statements” (discussed later in the chapter). Scott criticized the AAA monograph as
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
having a too narrow view of accounting in that it addressed only accounting’s
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
transaction function. Rather, he saw accounting as encompassing other important
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
functions, such as managerial control and the protection of the interests of equity
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
holders. He also viewed accounting as having both an internal control function and
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
an external function to act for the protection of various economic interests such as
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
stockholders,bond holders, and the government.
kiju k
ju
i kiju kiju kiju kiju
Although Scott’s first two works contain what were to become elements of his
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
conceptual framework, the first step in its articulation is contained in
kiju k
ju
i kiju kiju kiju kiju kiju kiju kiju kiju kiju
“Responsibilities of Accountants in a Changing Environment.” In this work he again
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
alluded to the influence of the Industrial Revolutionon a changing economy and saw it
kiju kiju kiju kiju kiju kiju kiju kiju k
ju
i kiju kiju kiju kiju kiju kiju
as requiring improved financial reporting to meet the needs of all investors. Scott
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
supported Paton’s earlier acceptance of the entity theory and went on to
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
emphasize that accounting must meet the needs of external users. This view is an
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
example of whyScott was considered an outsider, because the prevailing view was
kiju kiju kiju k
ju
i kiju kiju kiju kiju kiju kiju kiju kiju kiju
that accounting should be designed to benefit the firm’s management or proprietor
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
(the proprietary theory).
kiju kiju kiju
9.Discuss DR Scott’s hierarchy of postulates and principles.
kiju kiju kiju kiju kiju kiju kiju
In 1941 Scott unveiled his conceptual framework in “The Basis for Accounting
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
Principles.” He maintained that it could serve as a vehicle for the development of
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
internally consistent accounting principles. Scott’s framework includes the following
kiju kiju kiju k
ju
i kiju kiju kiju kiju kiju
hierarchy of postulates and principles to be used in the development of accounting
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
rules and techniques.
kiju kiju kiju
a. Orientation Postulate. —Accounting is based on a broad consideration of the kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
current social, political, and economic environment.
kiju kiju kiju kiju kiju kiju
b. The Pervasive Principle of Justice. —The second level in Scott’s conceptual
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
ki ki ki ki ki ki ki ki
Edition by Richard G. Schroeder
ki ki ki ki ki
,
,6.The purpose of Statements of Financial Accounting Concepts is to
kiju kiju kiju kiju kiju kiju kiju kiju kiju
a. Form a conceptual framework for solving existing and emerging problems.
kiju kiju kiju kiju kiju kiju kiju kiju kiju
b. Determine the need for FASB involvement in an emerging issue. kiju kiju kiju kiju kiju kiju kiju kiju kiju
c. Establish GAAP. kiju
d. Modify or extend an existing FASB Accounting Standards Update.
kiju kiju kiju kiju kiju kiju kiju kiju
Answer a kiju
Essay
7.Discuss the contributions of Paton and Canning to the development of accounting
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
theory.
kiju
The first attempts to develop accounting theory in the United States have been attributed to
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
William
kiju
A. Paton and John B. Canning. Paton’s work, based on his doctoral dissertation, was
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
among the first to express the view that all changes in the value of assets and
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
liabilities should be reflected in the financial statements, and that such changes
kiju kiju kiju kiju kiju k
ju
i kiju kiju kiju kiju kiju kiju
should be measured on a current value basis.
kiju kiju kiju kiju kiju kiju kiju kiju
He also maintained that all returns to investors (both dividends and interest) were
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
distributions of income, and consequently he espoused the entity concept rather
kiju kiju k
ju
i kiju kiju kiju kiju kiju kiju kiju kiju
than the prevailing proprietary concept. An additional contribution of this work
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
was an outline of what Paton believed to be the basic assumptions or postulates
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
underlying the accounting process. Paton’s basic assumptions andpostulates can be
kiju kiju kiju kiju kiju kiju kiju kiju k
ju
i kiju kiju
viewed as the first step in the development of the conceptual framework of
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
accounting. Canning’s work suggested a framework for asset valuations and
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
measurement based on future expectations as well as a model to match revenues and
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
expenses.
kiju At this time, the balance sheet was viewed as the principal financial
k i j u kiju kiju kiju kiju k
ju
i kiju kiju kiju kiju kiju kiju
statement, and the concept of capital maintenance wasjust emerging.
kiju kiju kiju kiju kiju kiju kiju kiju k
ju
i kiju
8.Discuss the contribution DR Scott to the development of accounting theory.
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
During this early period, significant contributions to the development of a
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
conceptual framework of accounting were also made by DR Scott. Scott was viewed
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju k i j u kiju kiju
as an outsider; however, his writings have proven to be quite insightful. Scott was
kiju kiju kiju kiju kiju kiju k
ju
i kiju kiju kiju kiju kiju kiju kiju
originally trained as an economist and was heavily influenced by the views of his
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
colleague, the economist and philosopher Thorstein Veblen. He adopted Veblen’s
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
view that many academics were overly occupied with refining the details of
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
existing theories when there was a need for the reexamination of fundamental
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
assumptions. Both Scott and Veblen viewed the Industrial Revolution as changing
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
the fundamental fabric of our society. Scott believed the Industrial Revolution
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
caused managers to look for new methods of maintaining organizational control. As a
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
result, scientific methods such as accounting and statisticsbecame organizational control
kiju kiju kiju kiju kiju kiju kiju kiju k
ju
i kiju kiju
tools.
kiju
, Scott contributed to the development of accounting theory by recognizing the need for a
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
normativetheory of accounting. This view, described in several publications from 1931
kiju k
ju
i kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
to 1941, evolved into a description of his conceptual framework in “The Basis for
kiju kiju kiju kiju k
ju
i kiju kiju kiju kiju kiju kiju kiju kiju kiju
Accounting Principles.
kiju kiju
In his first important work, The Cultural Significance of Accounts, Scott argued that
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
accounting theory was not a progression toward a static ideal but rather a process of
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
continually adapting to an evolving environment. The notion of adaptation later
kiju kiju kiju kiju k
ju
i kiju kiju kiju kiju kiju kiju
became one of Scott’s principles in his conceptual framework. He approached
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
accounting from a sociological perspective. The basic premise presented in Cultural
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
Significance was that the economic basis of any culture is shaped by the institutional
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju k
ju
i kiju
superstructure of the society in question. This view later evolved into his
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
orientation postulate.
kiju kiju
Scott’s next important work was a response to the American Accounting
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
Association’s “A Tentative Statement of Principles Underlying Corporate Financial
kiju kiju k
ju
i kiju kiju kiju kiju kiju kiju
Statements” (discussed later in the chapter). Scott criticized the AAA monograph as
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
having a too narrow view of accounting in that it addressed only accounting’s
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
transaction function. Rather, he saw accounting as encompassing other important
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
functions, such as managerial control and the protection of the interests of equity
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
holders. He also viewed accounting as having both an internal control function and
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
an external function to act for the protection of various economic interests such as
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
stockholders,bond holders, and the government.
kiju k
ju
i kiju kiju kiju kiju
Although Scott’s first two works contain what were to become elements of his
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
conceptual framework, the first step in its articulation is contained in
kiju k
ju
i kiju kiju kiju kiju kiju kiju kiju kiju kiju
“Responsibilities of Accountants in a Changing Environment.” In this work he again
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
alluded to the influence of the Industrial Revolutionon a changing economy and saw it
kiju kiju kiju kiju kiju kiju kiju kiju k
ju
i kiju kiju kiju kiju kiju kiju
as requiring improved financial reporting to meet the needs of all investors. Scott
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
supported Paton’s earlier acceptance of the entity theory and went on to
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
emphasize that accounting must meet the needs of external users. This view is an
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
example of whyScott was considered an outsider, because the prevailing view was
kiju kiju kiju k
ju
i kiju kiju kiju kiju kiju kiju kiju kiju kiju
that accounting should be designed to benefit the firm’s management or proprietor
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
(the proprietary theory).
kiju kiju kiju
9.Discuss DR Scott’s hierarchy of postulates and principles.
kiju kiju kiju kiju kiju kiju kiju
In 1941 Scott unveiled his conceptual framework in “The Basis for Accounting
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
Principles.” He maintained that it could serve as a vehicle for the development of
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
internally consistent accounting principles. Scott’s framework includes the following
kiju kiju kiju k
ju
i kiju kiju kiju kiju kiju
hierarchy of postulates and principles to be used in the development of accounting
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
rules and techniques.
kiju kiju kiju
a. Orientation Postulate. —Accounting is based on a broad consideration of the kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
current social, political, and economic environment.
kiju kiju kiju kiju kiju kiju
b. The Pervasive Principle of Justice. —The second level in Scott’s conceptual
kiju kiju kiju kiju kiju kiju kiju kiju kiju kiju
