Management's Influence in the Formulation of Accounting Principles

Management's Influence in the Formulation of Accounting Principles
2 DEVELOPMENT OF ACCOUNTING PRINCIPLES IN THE UNITED STATES
Cost accounting emerged in the 19th century as a result of the industrial revolution.
In the last half of the 19th century there was a development in accounting techniques for prepayments and accruals, as a way to enable the calculation of periodic profits.
Late in the 19th and 20th centuries there was a development in the funding report.
In the 20th century there were developments in accounting methods for complex issues, ranging from the calculation of earnings per share, accounting for business calculations, accounting for inflation, long-term rent and pensions, to the important problems of accounting as a new product from financial engineering.
2. 1 Stage of management contributions (1900-1933)
Management's influence in the formulation of accounting principles arose from the increasing number of shareholders and the dominant economic role played by industrial companies after 1900. The main player at that time was the association of professional accountants, the American Institute of Accountants (AIA).
The position of the AIA at the request of the Federal Trade Commission (FTC) is that "there are no sales, interest or administrative costs in the factory overhead". Opponents of the position of the Institute face a statement in the report that says "the calculated interest in production costs is a theory that is unfounded and wrong, and can be said to be impossible (absurd) in practice". Opposing parties also suffered defeat. Another important event at that time was the increasing impact of accounting theory on taxation of operating income. Although the 1913 income law provided the basis for calculating taxable profits on the basis of cash receipts and disbursements, the 1918 Act was the first to recognize the role of accounting procedures in determining taxable profits.

2. 2 stages of institutional contribution (1933-1959)
In 1934, Congress created the SEC with the task of managing a variety of federal investment laws, including the 1933 Securities Act which regulates the issuance of securities in interstate markets and the 1934 Securities Act which regulates securities trading.
After publication by Ripley in an article criticizing reporting techniques as being deceptive, George O. May, a British national, suggested that the American Institute of Certified Public Accountants (AICPA) start a work effort the same as the stock exchange. As a result, the Special Committee of the AICPA in collaboration with the Stock Exchange recommends the following general solutions:
A more practical alternative is to allow each company to freely choose its own accounting methods within ... a very broad range ... but requires disclosure of the methods used and the consistency of their application from year to year.
In addition, the Committee proposes its first official trial to develop generally accepted accounting techniques. Known as "general principles" (board principles).
After the issuance of ASR No. 4 by the SEC, which challenged the accounting profession to provide "substantial support from the authorities" for applicable accounting principles, and increased criticism from the American Accounting Association and its newly formed members, the next Institute in 1938 decided to authorize the Accounting Procedure Committee (CAP Accounting Committee) to announce its decision.

2. 3 Stage of politicization (1973-present)
Limitations held by both professional and management associations in formulating an accounting theory have led to the adoption of a more deductive approach while politicizing the standard setting process - a situation created by the generally accepted view that accounting numbers influence economic behavior and , as a consequence, accounting rules should be made in the political arena.
Since its inception, the FASB has adopted a deductive and quasi political approach in the formulation of accounting principles. What the FASB did got better value, firstly, by efforts to develop a theoretical framework or agreement in accounting, and secondly, with the birth of various interested groups, whose contribution was needed for "general" acceptance of new standards. Therefore, the standard setting process has a political aspect in it.
The process of setting standards can be described as democratic because, like all regulatory bodies, the right of the Council to make regulations will ultimately depend on the approval of the governing party. But because setting standards requires a number of perspectives, it is not appropriate if a standard is set based solely on the representation of the voters. Similarly, the process can be described as legislative because the setting of standards must be deliberated and because all views must be heard. But the standard compilers are expected to be able to represent all voters as a whole and not be representative of a particular group of voters. This process can be described as being political because there is a learning effort related to an attempt to get acceptance of a new standard.

History of Accounting and Its Development

History of Accounting and Its Development
1 EVOLUTION OF ACCOUNTING RECORDING PAIRS
1. 1 Early history of accounting
Various experiments have been carried out to state the location and time of birth of a paired recording system that has produced various scenarios. Most of these scenarios acknowledge the existence of a form of record keeping in most cultures since around 3,000 BC.

C. Littleton listed seven prerequisites for the emergence of systematic bookkeeping:
The Art of Writing, because bookkeeping is essentially a note; Arithmetic (Arithmetic), because the mechanical aspects of bookkeeping contain the existence of a series of simple calculations; Private Property, because bookkeeping is only concerned with the recording of facts about property and ownership rights; Money (Money) is a transaction that has not been completed, because there will be no incentive to make any notes if all exchanges are made on the spot at the same time; Commerce (Commerce), because a local sale alone will not create enough pressure (business volume) to stimulate people to coordinate various thoughts into a system; Capital (Capital), because without trading capital will not mean and giving credit becomes something that is impossible to imagine.
Each of the ancient cultures mentioned above has included these prerequisites, as well as explaining why there has been some sort of bookkeeping in it. If we want to trace this important knowledge (accounting) back to its origin, we will naturally assume the first meeting will be from the first traders; and no one is worthy of claiming that at that time other than the Arabs. The Egyptians, who for some time showed their glory in the world of commerce,
get the thought of carrying out such trade through its interactions with the nation; and, as a consequence, it was from them that the Egyptians had to do a first form of accounting, which, according to common trade methods, was communicated to all the cities in the Middle East. The business of trade, which for every trading city in Europe is connected by the Lombards, also introduces their method of account recording, through the use of paired records; now known as Italian bookkeeping.
This Italian bookkeeping developed, along with the development of trade from the Italian republic and the use of the method of bookkeeping in pairs in the 14th century. The first known pairing book is the bookkeeping of Massari from Genoa, which dates back to 1340.

1. 2 Luca Pacioli's Contributions
The name Luca Pacioli, a priest of the Franciscan order, is generally associated with the introduction of bookkeeping in pairs for the first time. In 1494 he published his book, Summa de Arithmetica Geometria, Proportioni et Proportionalita, in which there are two chapters - de Computis et Scripturis - describing bookkeeping in pairs. He stated that the purpose of bookkeeping was "to provide traders with non-delayed information about the state of their assets and debts". Debit (adebeo) and credit (credito) are used in recording to ensure a paired record. He said, "All records must be in pairs.
That is, if you make a creditor, then you must make a debtor ". Three books are used here: a memorandum, a journal, and a large book. At the same time, given the short life span of business firms, Pacioli suggested the calculation of a period's earnings and book closing. Below are the suggestions given:
It is a good thing to close the book every year, especially if you have a partnership with other parties. Frequent accounting records will extend friendships.

1. 3 Bookkeeping progress in pairs
These developments include the following:
Around the 16th century there were some changes in bookkeeping techniques. A noteworthy change is the introduction of special journals for recording different types of transactions.
In the 16th and 17th centuries there was an evolution in the practice of periodic financial statements. In addition, in the 17th and 18th centuries there was an evolution in the personification of all accounts and transactions, as an attempt to rationalize the debit and credit rules used in accounts that are uncertain in relation and abstract.
The application of a paired recording system is also extended to other types of organizations.
The 17th century also recorded the use of separate inventory accounts for different types of goods.
Starting with the East India Company in the 17th century and then followed by the development of the company, along with the industrial revolution, accounting gained a better status, which was indicated by the need for cost accounting, and the trust given to the concepts of sustainability , periodicity and accruals.
Methods for recording fixed assets evolved in the 18th century.
Until the beginning of the 19th century, depreciation for fixed assets only counted on unsold merchandise.

Accounting is an Information System that Identifies

Accounting is an Information System that Identifies
34. Encylopedia Britannica (1962)
Accounting is a broad term that shows certain theories, assumptions about how to act (behavior), rules of measurement and procedures for gathering and reporting useful information about the activities and objectives of an organization.

35. Sugiri and Riyono (2008: 1)
Accounting is defined as a service activity whose function is to provide quantitative information, specifically relating to finance. The information is expected to be input in the process of making economic and rational decisions.

36. Thomas Sumarsan (2013: 1)
explains that: Accounting is an art to collect, identify, classify, record transactions and events related to finance, so that it can produce information that is financial statements that can be used by interested parties.

37. Winwin yadianti, Ilham Wahyudin (2006: 6-7)
Accounting is an information system that identifies, records, and communicates economic events from an organization to interested parties. From this understanding contained accounting activities, namely:

1) Identifying economic events related to the relevant economic activities of a particular organization. Debt payments, cash repayment payments, credit sales are examples of these economic events.
2) Record the organization's financial activities historically. Recording is carried out systematically, sequentially according to the chronology of events and must be measured in monetary units. In this recording process, economic events are then classified and summarized.
3) Communicating economic events to interested parties in the form of financial statements that contain organizational financial information that can be used as a basis for decision making. One important element in communicating economic events is the ability of accountants to analyze and interpret the information reported.

38. Widjaya Tunggal
"Accounting is often stated as a language of business that is useful for providing information that can be used in the decision making process. This information is data presented / obtained by companies that are financial in nature and stated in monetary terms ".

39. Sofyan Syafri Harahap
 Accounting is the language or business communication tool that can provide information about the financial condition (economy) in the form of financial position, especially in the amount of wealth, debt, and capital of a business and its business results at a time (certain period).

40. Suwardjono
"Accounting is the art of recording, classifying, summarizing transactions, and events, which are financial in an efficient manner and in the form of monetary units, and interpret the results of the process."

41. The Meaning of Financial Accounting According to Martani (2012: 8)
Financial accounting is oriented towards reporting external parties. The diversity of external parties with specific objectives for each party makes the compiler of the financial statements using the principles and assumptions in preparing financial statements.

For this reason, accounting standards are needed that serve as guidelines both by the author and by readers of financial statements. Reports produced from financial accounting in the form of financial statements for general purposes (general purpose financial statement).

42. According to Sudibyo (1987)
Accounting is a technology, so it must be treated as a technology. Technology is used to control natural and social variables to achieve certain better lives.
If accounting is directed to become a theory, then accounting theory should be free from social values and not normative. The theory should not directly affect accounting practices, because the theory does not control theorized variables.

43. In Mautz's view
Accounting is a complete social science, and according to his argument is: "Accounting relates to companies, which of course are social groups. accounting is concerned with transactions and other economic events that have consequences and have an impact on the social relations accounting results

useful and meaningful knowledge for people engaged in activities that have social implications. accounting is essentially mental according to the basics of existing guidelines, accounting is a social science ".

44. According to Wikipedia
Accounting is a measurement, translation, or providing certainty about information that will help managers, investors, tax authorities and other decision makers to make the allocation of decision resources in companies, organizations, and government agencies.

45. Horngern (2000)
According to Horngern (2000) states that accounting is as a process of recording, measuring and delivering economic information so that it can be used as a basis for decision making or policy.

Read Articles About Accounting

Read Articles About Accounting
21. Dr. M. Gede
Accounting is an applied science and the art of recording that is carried out continuously according to the rules and systems, processing and analysis of these records so that a financial report is arranged as an accountability from the leadership of the company and the institution for its performance.

22. Sophar Lumbantoruan (1989)
Accounting is a tool used as a business language. The information it conveys can only be understood if the accounting mechanism has been understood. Accounting is designed so that the recorded transactions are processed into useful information.

23. American Accounting Association (1966)
Accounting is a process of identifying, measuring, recording, and reporting economic (financial) transactions of an organization / entity that is used as information in order to make economic decisions by parties who need them. This understanding can also include analyzing the reports produced by the accounting.

24. Accounting Principles Brord Statement No. 4 (Muhammad, 2002: 10)
Accounting is a service activity, whose function is to provide quantitative information, especially financial in nature about economic entities that are intended to be useful in making economic decisions - making logical choices among alternative actions.

25. West Churman
Accounting is a written experience that is useful for making decisions that occur in a company.

26. Kohler’s Dictionary
Accounting is an art of recording the process of financial transactions.

27. KBBI (Big Indonesian Dictionary)
Accounting is the theory and practice of silverware, including responsibilities, principles, standards, custom (habits), and all its activities; matters relating to accountants; the art of recording and summarizing financial transactions and interpreting the effects of a transaction on an economic unit.

28. Suparwoto L (1990: 2)
Stating that accounting is a system or technique for measuring and managing financial transactions and providing the results of management in the form of information to internal and external parties of the company. This external party consists of investors, government creditors, trade unions and others.

29. According to Kieso, et al. (2016: 2)
The explanation above can be interpreted Accounting consists of three basic activities, namely the identification, recording and communication of economic events of an organization to interested parties. The company identifies economic events according to its business activities and records these events to provide records of financial activities.

The recording is carried out systematically, chronologically for each event, in units of currency. Finally, in communicating the aforementioned collection of information to interested parties in the form of accounting reports or financial statements.

30. Hans Kartikahadi, et al. (2016: 3)
"Accounting is a financial information system, which aims to produce and report relevant information for various interested parties".

From the above definition, it can be concluded that accounting is the process of identifying, recording, and communicating the final results in the form of financial statements that reflect the state of the company to the parties concerned.

31. Wibowo
Accounting is as a procedure of recognizing, recording and correspondence of financial exchanges of an element or organization. This means accounting is an information system that recognizes and records financial transactions and then presented in the financial statements.

32. KAM (1990)
Accounting is an art of recording financial transactions.

33. Dr. M. Gade
Accounting is an applied science and the art of recording that is carried out continuously according to a particular system, processes and analyzes these records so that a financial report can be prepared as a responsibility of the head of the company or institution for its performance.

Understanding of Accounting in General

Understanding of Accounting in General
6. Henry Simamora (2005)
Accounting is the process of measuring the economic activity of an entity in units of money and communicating the results to interested parties.

7. Sofyan Harahap (2005)
Accounting is as a process of identifying, measuring, and delivering economic information as information material in terms of considering various alternatives in drawing conclusions by its users.

8. Zaki Baridwan (2000)
Accounting is a service activity, its function is to provide quantitative data, mainly those of a financial nature, from economic ventures that can be used in making economic decisions in having alternatives in a situation.

9. Suparwoto L
Accounting is as a technique or system for measuring and managing financial transactions and presenting the results of management in the form of information to internal and external parties of the company. External parties include investors, creditors, governments, trade unions and so on.

10. Paul Grady
Accounting is as a body of science and organizational functions systematically, authentic and original in recording, classifying, processing, making summaries, analyzing, interpreting all transactions and events and financial characteristics that occur in the operations of accounting entities with the aim of providing meaningful information needed by management as a report and accountability for the trust it receives.

11. Mulyadi
Accounting functions as a tool to record and present financial reports to facilitate management in managing the company.

12. Littleton (Muhammad, 2002: 10)
Accounting is a comparative calculation of the costs incurred as a business with the achievement of results that are the achievements of the business.

13. Financial Accounting Standars Board (FASB)
Accounting is a service activity whose function is to provide quantitative information which is then used for economic decision making.

14. Charles Thomas Horngren and Walter T. Harrison (Horngren Harrison, 2007: 4)
Accounting is an information system that measures business activities, processes data into reports and communicates the results to decision makers.

15. American Institute of Certified Public Accountants (AICPA)
Accounting is the art of recording, classifying and summarizing in certain ways in terms of monetary, transaction and events which are generally financial in nature including interpreting the results. In a sense, accounting is the art of recording, classifying and compiling a summary of events on financial transactions which are then presented in the financial statements.

16. Abu Bakar A.
Accounting is as a procedure of recognizing, recording and correspondence of financial exchanges of an element or organization. This means accounting is an information system that recognizes and records financial transactions and then presented in the financial statements.

17. Rudianto
Accounting is an information system that produces a financial report to related parties with an interest in economic activities and the condition of a particular business entity.

18. Arnold
Accounting is seen as a system for providing a particular financial information to anyone who makes decisions and who controls them.

19. Warren et al
Accounting in general is an information system that generates a financial report to related parties or interests regarding economic activities and company conditions.

20. Decision of the Minister of Finance of the Republic of Indonesia (NO. 476 KMK. 01 1991)
Accounting is a process of gathering, recording, analyzing, summarizing, classifying and reporting financial transactions from an economic unit to provide financial information for users of reports that are useful for decision making.

Understanding of Accounting According to Experts

Understanding of Accounting According to Experts
Understanding Accounting According to Experts Complete With Its History: Accounting is a process of recording, classifying, summarizing, processing and presenting data, transactions and in events related to finance. Accounting is a process of recording, classifying, summarizing, processing and presenting data, transactions and in financial-related events that can be used by people who use them easily understood in making a decision and other objectives.

Understanding of Accounting in General
Accounting is often referred to as a business language, or more accurately, the language of decision making. The more someone masters this language, the better the person will handle various aspects of finance in his life. The definition of accounting can be formulated through 2 (two) points of view, namely the definition from the point of view of the users of accounting services and the definition from the perspective of the process of its activities.
From the point of view of users of accounting services, accounting can be defined as a scientific discipline and / or service activity that provides information needed to carry out activities efficiently and evaluate the activities of an entity or financial transactions. The usefulness of accounting information is to:
Make effective planning, as well as supervise, and make appropriate economic decisions by management
The responsibility of the entity to investors, creditors, the government, and so on.
If viewed from the perspective of the process of its activities, accounting can be defined as the process of recording, classifying, summarizing, reporting and analyzing the financial data of an entity. From this it can be seen, that accounting is a complex activity, involving a variety of activities, so basically accounting must:

Identify which data is relevant or relevant to the decision to be taken,
Process or analyze relevant data,
Turn data into information that can be used for decision making.
From the above definition, we can simply explain that accounting can produce information that is used by managers to carry out company operations. Accounting also provides information to interested parties to find out the financial performance and condition of the company.

Understanding of Accounting According to Experts
Here Is An Understanding Of Accounting According To Experts.

1. ABP Statement No. 4 in Smith Skousen (1995: 3)
Defining Accounting is a service activity that provides quantitative information, especially those that have the nature of making economic decisions in making decisions that make logical choices among alternative actions.

2. American Accountants Association
Stating that Accounting is a piece, estimation, and reporting of financial data, which allows an assessment and choice to make clear and decisive for individuals who utilize data.

3. Frederich D.S. Choi, Gerhard G. Mueller
Accounting is a process of identifying, measuring and communicating economic information to enable users to make judgments and decisions.

4. Soemarsono S.R (2004)
Accounting is the process of identifying, measuring and reporting economic information to enable clear and explicit assessments and decisions for those who use that information.

5. S. Munawir (2005)
Accounting is an art rather than recording, classifying and summarizing events and events and at least financial nature in the most expeditious way and as directions or expressed in money, as well as interpreting the things that arise from it.

Definition and Function of Financial Accounting

Definition and Function of Financial Accounting
Accounting has a very important role in making a decision, not least in financial accounting which has its own role in making decisions. On this occasion here will review the complete financial accounting ,. Therefore, let us consider the reviews below.

Understanding Financial Accounting According to Experts:
Financial Accounting According to Warren Reeve Fess (2008: 15)
In the book "Introduction to Accounting Accounting", Warren Reeve Feves explains:
"Financial accounting is primarily concerned with the recording and reporting of economic data and activities for a business. Although such reports provide useful information for managers, they are the primary reports for owners, creditors, governmental agencies, and the public. "(2008: 1)
Meaning: Financial accounting is the recording and reporting of data and economic activities of the company. Although the report produces information that is useful for managers, but it is the main report for the owner (owner), creditors, government agencies and the general public. "(2008: 15)

Financial Accounting according to Donald E. Kieso, et al (2008: 2)
In his book "Intermediate Accounting"
Financial accounting is a process that ends in making financial statements concerning the company as a whole for use by both internal parties and external parties. "(2008: 2)

The Meaning of Financial Accounting According to Martani (2012: 8)
Financial accounting is oriented towards reporting external parties. The diversity of external parties with specific objectives for each party makes the compiler of the financial statements using the principles and assumptions in preparing financial statements.
For this reason, accounting standards are needed that serve as guidelines both by the author and by readers of financial statements. Reports produced from financial accounting in the form of financial statements for general purposes (general purpose financial statement).

Definition of Financial Accounting Standards (SAK)
Financial Accounting Standards (SAK) is a framework in the procedure of making financial reports so that uniformity occurs in the presentation of financial statements (Augustyas, 2011).

Financial Accounting Function
In order to know and calculate the profit or loss that has been obtained by the company.
In order to provide information that can be useful for company management.
In order to help determine the rights for each party that has an interest in a company, both internal and external parties.
To supervise and control various kinds of activities that occur in the company.
to help a company achieve its predetermined targets.
Can provide information that can be useful for company management.
Knowing and calculating the profit or loss that has been obtained by the company. To assist a company in achieving its predetermined targets.
Helps to establish the rights for each party that has an interest in a company, both internal and external parties.
To supervise and control various kinds of activities that occur in the company.

The Purpose of Financial Accounting
To provide reliable information about a change in a company's net economic resources arising from an activity in order to make a profit.
Aims to provide a reliable information about assets, liabilities and finally capital.
Aims to help users in estimating a company's potential to generate a profit.
Aims to provide other important information regarding a change in economic resources & obligations such as information about shopping activities.
Aims to disclose other information relating to a financial statement that is relevant to a user's financial statement needs.