Question

Consider truth status of accounting numbers. Are the accounting numbers reflecting a concrete truth or are they the outcome of social construction.

You are required to:

-argue the ontological status of accounting numbers based on fair value?

-propose a research approach that will help you know more the ontological assumption undertaken above?

Answer 1

We can discuss the above issue by looking at the advantages and disadvantages of the accounting records:

Advantages:

1. Provide record related to entity's financial relation with the client and workers.

2. Lend creditibility, particularly if someone extends loan on the basis of this creditibility.

3. Shows the true financial position and condition of the entity.

4. Helps the investor to decide whether to invest in the company or not

5. Helps the government to assess the position of the company in order to recover the tax from the company.

Disadvantages:

1. Accounting record may be prone to manipulation

2. Does not consider the qualititative factors

3. Sometimes the accounting records kept by the entity may not be accurate.

4. Does not consider the time value of money

Thus, looking at the prons and cons of the accounting records, it can be said that it depends on the use for which accounting records are going to be used.