Accounting Theory: Missing in Action? Little Has Changed in the 500 Years since Luca Pacioli Introduced Accounting "Theory" by Describing the Accounting Practices in Use at the Time and Explaining the Rationale Behind the Methods

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Recent corporate and audit failures have involved both accountants and auditors, the very professionals expected to police and stop corporate mugging of the public's investments. These practitioners need accounting theory--a conceptual framework--to guide and inform accounting practice, thus producing transparent reporting, which is the foundation of the investing public's confidence.

Our study surveys accounting theory in doctoral programs. Specifically, the study attempts to identify how doctoral programs define accounting theory and to measure the level of inclusion of accounting theory in each program. Lack of accounting theory (guiding and informing practitioners) in accounting doctoral curricula could indicate a need for change to those curricula. Likewise, presenting accounting theory as anything other than a conceptual framework smacks of following rather than leading accounting practice. Is accounting theory--the basic foundation of accounting--really leading the profession or merely following its practices?

The basic explanation of accounting theory as the conceptual framework for applying accounting principles was debated throughout the last century. The American Accounting Association (AAA) published a series of "Statements of Accounting Principles" in The Accounting Review (1936, 1941, 1948, and 1957) in an attempt to establish a basis for accounting statements and to develop accounting concepts. (1) While accounting principles were being debated and developed, accounting theory--which would provide the conceptual framework for application of accounting principles--was allowed to lag.

In 1966, AAA published A Statement of Basic Accounting Theory. To do this, it created the Committee to Prepare a Statement of Basic Accounting Theory, which attempted "... to establish a foundation of concepts from which particular practices can be judged." (2) Later, in 1977, AAA published Statement on Accounting Theory and Theory Acceptance. In it, the Committee on Concepts and Standards for External Financial Reports admitted that "... a single universally accepted basic accounting theory does not exist at this time." (3)

In the first volume of his five-volume Essays in Accounting Theory, Carl Devine describes accounting theory as "the entire complex of logical rules, primitive terms, semantic rules of correspondence, interpretations, definitions, theorems, etc., necessary to explain ... behavioral or physical observations." (4) Thomas Evans defines theory as "a coherent set of hypothetical, conceptual, and pragmatic principles forming a general frame of reference for a field of study." (5) Evans refers to William Paton and A.C. Littleton when he defines accounting theory as "a coherent, coordinated, consistent body of doctrine expressing the standards by which corporation accounting may be judged." Both of Evans's definitions are consistent with the 1966 and 1977 AAA publications.

We see that several accounting theorists have defined accounting theory as being a conceptual framework consisting of accounting principles to guide and inform accounting practitioners, educators, and researchers. In reality, however, accounting principles--the basis of accounting theory--have followed rather than led practice.


In their book, Intermediate Accounting, Donald Kieso, Jerry Weygandt, and Terry Warfield note that the basic assumptions of accounting theory are monetary unit, economic entity, going concern, and periodicity. And accounting theory's foundation is based on the principles of historical cost, revenue recognition, matching, full disclosure, materiality, and conservatism. (6)

Throughout history, accounting theory--a framework of accounting principles--has always followed after accounting practice. Luca Pacioli is considered the father of accounting because one chapter of his Summa Mathematica described double-entry bookkeeping practices. …


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