Accounting Reports and Regulations

             What are accountants trying to describe with an income number? (i.e., discuss alternative concepts of income)
             Income reporting is used for the measurement of management efficiency, estimation of business future performance and future dividend distribution. Furthermore, it is used to measure the accomplishment and as a guide to future managerial decisions. Typically, accountants describe income numbers as the surplus effect from business activity, resulting from the cash cycle of business operation. The surplus is arrived by matching the revenues against the related expenses of an entity within an accounting period as stated in Statement of Accounting Concepts 4 (SAC 4). Income is also known as surplus after maintaining the value of capital as a whole.
             A broad prospect of an accountants' description of income, can be either a semantic or pragmatic approach. The semantic description of income relates to the economic concepts of income, is more often referred and credited to the economist, J. R. Hicks (1946, p. 172) who think that income is the maximum value that a person can consume during a week and still expect to be as well off at the end of the week as he was in the beginning. Economists define income as an ex-ante measure and suggest that income is the future expectation of an event before it occurs. Therefore, the economic concept of income describes assets of all kinds as future receipts expected to flow into the firm. An accountants' pragmatic approach towards income relates to concepts of income that involve the decision processes of investors and creditors, the reactions of securities prices in organized markets to income reporting, the capital expense decision of management, and the feedback reaction of management and accountants. A few examples of pragmatic concepts of income, alternatively defined as realistic concepts of income include the current operating concept, all-inclusive concept, and the value-added concept. ...

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Accounting Reports and Regulations. (1969, December 31). In MegaEssays.com. Retrieved 19:12, March 28, 2024, from https://www.megaessays.com/viewpaper/13541.html