Part I
Context of Accounting
Part I describes the context and role of accounting in business and provides some
theoretical frameworks. It is hoped that this will offer a foundation for readers’
understanding that accounting is more than a technical subject and is grounded
in competing theories. These theories are themselves rooted in historical, political,
economic and social causes. The theoretical framework should help to make the
subject more meaningful to students and practitioners alike.
Chapter 1 provides an introduction to accounting, and an overview of account-
ing history as well as describing how the role of accounting has changed, including
the influence that this changed role has had on non-financial managers. Chap-
ter 2 describes the context in which management accounting operates: the capital
market emphasis on shareholder value, and the strategic necessity of organizing
complex businesses through divisions.
Chapter 3 describes how transactions are recorded by accounting systems
and the limitations that are imposed by these methods. Chapter 4 covers the
traditional theoretical approach to management accounting and control, while
Chapter 5 offers alternative perspectives on accounting. The theoretical framework
in Chapters 4 and 5 is important to support the interpretive analysis and critical
perspective taken by this book.
Chapter 6 shows how the most important financial reports are constructed.
This introduction to financial accounting is an important building block for an
understanding of management accounting.