The Significance of the Concept of the Corporation in Accounting Analyses.

Abstract The article critically examines the extent to which significantly unique results are obtained when differing concepts of the corporation are made the basis for the analyses of transactions involving changes in the accounts relating to the interests of corporate security holders. In order to limit this presentation, only three such transactions will be considered in this article. Those selected are transactions involving interest charges, income taxes and dividends, transactions which are sometimes held to affect the measurement of income and sometimes treated as distributions of income. There has been considerable controversy in the accounting literature with respect to the nature of these items and their analysis should therefore constitute an acceptable test of the significance of the underlying corporate concept and the validity of the approach here employed. Four concepts of the corporation will be utilized. The first two underlies the proprietary and entity theories of accounting, respectively, as those theories are generally propounded. The third concept is the notion underlying the enterprise theory of accounting. And the fourth concept seems to be the one most frequently reflected in current accounting practice.