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Interests In Research, Theory And Its Application

Posted on:2003-11-30Degree:DoctorType:Dissertation
Country:ChinaCandidate:P LiFull Text:PDF
GTID:1116360122955211Subject:Business management
Abstract/Summary:PDF Full Text Request
This study investigates the accounting equity theory and its application. The paper is structured as follows. The first three chapters outline the theories. The next two chapters deal with the theory's applications in China. Chapter 1 describes the origins of equity theory and its importance in accounting. From the accounting's perspective, "equity" has different meanings. Different equity definitions reflect not only different understanding of the concept across different countries or regions, but also different understanding of the concept under different organizational business structure. Most important of all, this understanding difference manifests that accounting field has no unanimous agreement on equity concept and theory. Firstly, this chapter discusses the definition, nature and origins of equity. Equity concept emerged nearly at the same time the accounting was originated. Three factors have contributed to its emergence, private ownership, economy development especially the business structure, and the development of accounting itself. The first two factors are the prerequisites, while the last factor (e.g., the double book keeping and categorization of journals) is the direct determinant. Secondly, this paper discusses the importance of equity theory in accounting. Equity theory is a fundamental concept, which is similar in spirit to accounting hypotheses. Equity theory and accounting hypotheses are both determined by environments. Lastly, this chapter outlines the objective, scope and structure of the study.Chapter 2 presents six different equity theories and provides a general discussion on their distinctions and links. Next, discussion is focused on two most prevailing theories, the proprietary theory and the entity theory. There are six equity theories. The proprietary theory has the longest history, it explains accounting from the owner's perspective. The entity theory regards a business as an entity independent of its owners, and accounting serves for the entity. The fund theory divides the business activities into different activity groups, and different group functions differently and uses different accounting system. The residual equity theory argues that accounting provides service mainly for the residual claimant, the shareholders. The enterprise theory states that a business is embedded in the entire society and accounting must reflects the interests of every individual who has shares in the business. The commander theory states that accounting serves for the managers in making internal decisions and measuring operating performance. To a certain extent, different equity theories link to each other. There are two streams of links. The first stream regards the business and owners as a whole, such as the proprietary theory and residual theory. The second stream doesn't limit accounting service to the owners of a business, such as the fund theory, the enterprise theory and the commander theory. Based on the analysis of different equity theories, I further examines the two most important equity theories- the proprietary theory and the entity theory. The research shows that the two theories have different impacts on the other accounting theories and accounting practices. These comparisons provide us with a better understanding when choose an appropriate equity theory. Theoretically, the two equity theories are developed from different angles and purposes as to double book keeping. Practically, the two equity theories influence accounting differently in accounting equation, book keeping method, transaction notion, assets and liability concepts, capital maintenance, revenue recognition, and revenues and costs. I also compare the deficiencies of the two equity theories. The proprietary theory cannot meet the needs of modern organizational structure of business while the entity theory is difficult to understand. Thus, both theories need further refinements.Chapter 3 attempts to choice the theory that is more suitable to accounting. I reach the conclusion t...
Keywords/Search Tags:Equity Theory, The Proprietary Theory, The Entity Theory, Share Equity Capital Cost, The Entity Equit
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