Name: Bintang Seantaro

Npm: 120110091067

Summary of Chapter 7 Financial Accounting Theory

Accounting Theory
Accounting theory is conventionally concerned with Iinancial accounting, i.e. with
accounting to external providers oI Iinance. It includes all aspects oI published Iinancial
reports:
1.their purpose;
2. their Iorm;
3. their content;
4. the laws, regulation, and guideline governig them;
5 the accounting policy-makers who determine them.
There are some diIIiculties in Iinancial accounting in public sector, they are;
1. The number oI users will be huge
2. Their needs/will conIlict
3. Users have been conditioned by accountants Ior many years, so that their expressed
needs may simply reIlect marginal improvements on what their already been
receiving.
4. Users are not necessaryly rational.
5. Users needs are likely to change over time.

Accounting Theory and Public Sector Organisation
Although there are diIIiculties involved in deIining the business sector Ior accounting
purposes, these diIIiculties have never been considered primary. Organisation useIully be
categorized in one oI three diIIerent ways;
1. !roIit oriented
2. Type A nonproIit
3. Type B nonproIit

Stewardship and Accountability
Stewardship reIers to the holding oI someone else`s assets by steward. Stewardship
accounting is ,thereIore, typically, limited to the balance sheet showing the money collected
by the stewards, the Iorm in which that money is held and, and an audit certiIicate vouching
Ior the truth Iairness oI the statement.
Accountability reIers to the responsible Ior your actions to someone else. Accounting is
concerned with Iinancial accountability plus some aspect oI economic accountability. This
kind accountability goes beyond the narrowly deIined stewardships oI asset to include
responsibility Ior the perIormance oI those assets.

Objectives in Public Sector Accounting Theory
Differential approach, gives top priority diIIerentiation Iinancial reports Ior users who are
also diIIerentiate.
Integral Approach, gives top priority to the things that is general (integrity) Iinancial
statements, so it can be understood by all users.
And the constraints are:
1.Objectivity
2.Consistency
3.Comparability
4.Timeliness
5.Ease and economy oI account preparations

The Reporting Unit
The number oI theories oI the reprting unit has been put Iorward. These are the main ones:
1. !roprietary theory, sees the organisation exclusively in terms oI the owners
(proprietor).
2. ntity theory, the entity view oI an organisation is that it is distinct Irom any group oI
individual associated with it.
3. :nd theory, reporting unit is the Iunds that managed by public sector organizations.
4. ommander theory, The entity consists oI the commanders who responsible, which
shows the perIormance organization as a whole.