Test Bank for Financial Accounting Theory and Analysis, 14th Edition by Richard G. Schroeder|ISBN :9781119881162 |newest edition 2024|2025

Test Bank for Financial Accounting Theory and Analysis, 14th
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Edition by Richard G. Schroeder
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,
,6.The purpose of Statements of Financial Accounting Concepts is to
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a. Form a conceptual framework for solving existing and emerging problems.
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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.
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Answer a kiju




Essay

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