An "Events" Approach to Basic Accounting Theory.

The article reports on the basis of accounting theory. In 1966, after two years work, a committee of the American Accounting Association issued "A Statement of Basic Accounting Theory." Undoubtedly, the most startling recommendations were the sanctioning of current costs and the advocacy of two column (historical and current) reports. To this member of the committee, however, even more startling was that the near unanimous agreement on the recommendations was arrived at by following two very divergent paths originating from two very dissimilar basic concepts about accounting. The "Value" school within the committee, or as they would probably prefer to be termed the "User need" school, assumed that users' needs are known and sufficiently well specified so that accounting theory can deductively arrive at and produce optimal input values for used and useful decision models. Most of the value theorists visualize accounting's purpose as producing optimum income and capital value or values. Proponents of the "Events" theory suggest that the purpose of accounting is to provide information about relevant economic events that might be useful in a variety of possible decision models. They see the function of accounting at one level removed in the decision-making process.