A Pragmatic approach to Accounting Theory.

Abstract The article reports that accounting is a response to needs, and particular accounting activities are a response to particular needs. A study of accounting practice will make apparent the progression from needs to objectives to methods and rules. In a simple, slowly changing, but competitive society, the process of evolution is likely to bring forward an appropriate set of accounting methods and rules. But in a complex, rapidly changing, and highly competitive society, there is a need for a short-circuiting of the evolutionary process and for a recognition of its limitations. An accounting system accumulating, classifying, analyzing and relating both financial and statistical data is the major source of managerial information. In the first place there is the value of the record itself. What is applied in administrative accounting is relevant also to external reporting. For effective definition of objectives, and therefore rules, it is necessary to specialize, concentrating on the shareholder as primary addressee of the financial report. The methods and rules should be based on objectives, after due regard for practicality and for presently acceptable standards, and the objectives should extend from needs.