ACCOUNTING, ACCOUNTANCY AND SOCIAL

RESPONSIBILITY
Assoc. Prof. Živko Bergant, PhD
College for Accounting and finance
Stegne, 21c Ljubljana, Slovenia
zivko.bergant@vsr.si

Abstract: Accountancy is often understood as a synonym of accounting (e.g.

CGAP Glossary). Some examples show that accountancy has mainly a broader
meaning compared to accounting. It represents an entire body of the theory and
practice of accounting. Accounting however, is predominantly reserved for the
naming the process. Therefore, the question is, what does accountancy mean in
a particular organization. The next question is, what the criterion for proper
accounting performance is. The author notes that social responsibility of the
company and the accounting holders is the correct criterion. He justifies and
demonstrates this in his paper. It means that accountancy cannot be and should
not be a neutral science without its impact on society.

Keywords: accounting, accountancy, social responsibility, sustainable development,

added value

1 Introduction

Accountancy is often understood as a synonym of accounting (e.g. CGAP

Glossary). A book can be find, titled as Accountancy, but subject of the book is
only accounting (e.g. Hadi, 2013). Inside this book, there is no word about
accountancy (except in the preface). More detailed definitions of accountancy
can be found in Market Business News (MBN, 2019): “Accountancy is an
information science we use to gather, classify, and manipulate financial
information. Not only companies, but also individuals, charities, and many
other entities are familiar with accountancy.” However, “Accounting is the
work or process of keeping financial records. It is the systematic recording,
reporting, and analysis of the financial activity (transactions) of a person,
business, or organization. In business, it allows companies to analyze their
financial performance.” (MBN, 2019).

Similar definitions have Radhakrishnan et al. (2019): “Accountancy refers to a

systematic knowledge of accounting. It explains “why to do” and “how to do”
of various aspects of accounting. It tells us why and how to prepare the books
of accounts and how to summarize the accounting information and
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communicate it to the interested parties." However, "Accounting refers to the
actual process of preparing and presenting the accounts. In other words, it is the
art of putting the academic knowledge of accountancy into practice«
(Radhakrisnan, 2019).

These examples show that accountancy has mainly a broader meaning that is
related to information science, knowledge, profession, journals, subject in
schools, auditing, “business language” etc. It represents an entire body of the
theory and practice of accounting (Kohler in: Juthani and Mehta, 2019).
Accounting however, is predominantly reserved for the naming the process.
Therefore, the question is, what does accountancy mean in an organization. The
next question is, what the criterion for proper accounting performance is. These
questions deserve more attention in next chapters.

2 Accounting and accountancy in an organization

Considering accountancy as broader concept comparing to accounting, first, we

must define a content of accounting and accountancy on the level of an
organization. Most authors agree that accounting has now been raised to the
level of an information system of a company (e.g. AICPA, 2015). However,
such an understanding is not consistent with accounting, which is defined as a
mere process.

To clarify this inconsistency, the systemic approach (with partial systems)1 is

useful. On the highest level, an organization (or business system) has three
partial systems: the execution partial system, the information partial system and
the managerial (decision-making) partial system. The position of accounting in
information partial system is shown in Figure 1.

Figure 1 has four main triangles showing four information functions of each
information system:
1) Past data processing,
2) Future data processing,
3) Controlling data processing,
4) Analyzing data.

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Partial system in accordance with the theory of systems is defined as the entire system, is
viewed only from a certain point of view (for example, the skeleton, nervous system or blood
circulation in the human body. Subsystems represent, for example: head, arm, leg, etc.).
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Figure 1: Accounting as a part of information system

The arrows in Figure 1 show first, the broader scope of information function in
an information system and second, the narrower scope of these functions in
accounting. Obviously, the accounting that lies between bold lines, has parts of
all information functions. These parts are accounting information functions:
1) Book-keeping as a part of past data processing,
2) Forecasting accounting data as a part of future data processing,
3) Controlling accounting process as a part of controlling data processing,
4) Analyzing of accounting data as a part of data analyzing function.

In such a conclusion, something is missing. If accountancy is generally an

information science, what about accountancy on the level of a company?

We can answer this question using a systemic approach. A company's

accountancy could be viewed through three partial systems: operational partial
system, informational partial system and managerial partial system. They are
shown in Figure 2.

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Figure 2: Partial systems of accountancy in an organization
Operational partial system encompasses operating parts of accounting: book-
keeping, forecasting, analyzing and operational controlling (internal controls).

Information partial system of accounting system encompasses informing

(presentation, explanation, communication, display etc.), archiving data and
information, and reporting about controlling.

These two partial systems present the subject and the elements of accounting
process in an organization. Together with the management partial system, they
form accountancy as a whole concept in an organization. Accounting is
therefore a subset of accountancy.

The accounting process in governed by accounting standards and internal

accounting rules. Management of the accounting process should be ruled by
basic management principles.

The head of accounting is a manager with all management responsibilities.

Therefore, his tasks and their implementation are integral parts of accountancy
as a whole. Such an understanding of accountancy implies the need to treat the
accountancy management professionally as a specific subject of study. In doing
so, adequate interdisciplinary approach is needed.

Management in accountancy comprises all the basic management functions:

planning, organizing and controlling of accounting processes. It can be seen
from Figure 2 as well.

The information part of planning process in an organization is named

forecasting. Forecasting is one of information functions that provide
information about future which is based mainly on past trends and forecasted
management decisions in the future. The head of accountancy in an
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organization is in charge for this process. In Figure 2, forecasting of accounting
data is therefore positioned in the information partial system.

Managerial part of accounting planning process is positioned in managerial

partial system. It is a planning function, and results in a plan of accounting
activities. This plan includes a determination of information needed, the users
of information, planned human resources and their development, fixed assets,
intangible assets, information technology etc.

Plan of accounting activities is a “business plan” for an accounting information

system. It should be approved by the management of an organization and
therefore represents the goals to be achieved. Of course, it is not necessary to be
a special document, but its content should be incorporated in business plan of
the organization as a whole. Such an approach is very important in promoting
of accounting and the accounting profession in an organization.

Information part (forecasting) and management part (decisions) of the planning

process and their interactive operations form the entire planning process in the
organization.

Differentiation between forecasting and decisions for the future (i.e. planning)
is important for distinguish the responsibilities of information officer (or
manager of accountancy, which provides information), to the responsibilities of
the manager of an organization (for providing decisions). At the same time, this
differentiation enables one to understand close connectedness of both managers
and their cooperation in the total planning process.

Another distinction is important: supervising the accounting process is the

responsibility of the head of accounting, while supervising accountancy as a
whole is the task of the manager of an organization.

In the above considerations, an accounting department in an organization is not

mentioned, nor does it appear in Figure 2. The accounting department is only an
organizational unit (it means it is a subsystem), therefore it appears in the
organizational structure of an organization and not in the partial systems
approach. Accounting department does not normally perform all accounting
tasks in accordance with Figure 2. In addition, it often also performs non-
accounting tasks, especially in smaller organizations.

Non-accounting tasks are those that do not belong to the information partial
system, so they are not part of the information process. The basic criterion for
the provision of such non-accounting tasks in an accounting department is
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rationality, i.e. lower costs with the same quality of service. Such a solution
however is rational only temporary, until circumstances change.

3 Comprehensive accounting theory

Accounting theory has evolved throughout history. More about history of

accounting theory can be found in Unegbu (2014). Today accounting theory
achieved the status that is best represented by the international accounting
standards. These standards are focused primarily to external reporting, which is
mostly named as financial accounting. Internal reporting however is treated in
numerous professional literature through other accounting disciplines (e. g. cost
accounting and management accounting) as good accounting practices.

Such accounting theory has at least three important drawbacks. First, it treats
accounting only as a process (e. g. Hendriksen, 1965) and basic accounting
principles (e. g. Smyth, 2018). Therefore it neglects the management aspect
(management partial system) that is an integral part of accountancy, which is
shown in Figure 2. Second, it neglects the importance of connectedness of
accounting with actual economic system, which dictates criteria and main
information of business success. Third, it neglects also the impact of accounting
theory on socio-economic and political development. This effect is otherwise
recognized, but the authors usually do not connect accounting theory closer to
social responsibility aspects.

A special attention must be dedicated to this aspects. The main features of such
understanding of accountancy as a theory in shown in Figure 3. Figure 3 shows
the entire field of accountancy in relation to social responsibility.

At first, it shows the division of accountancy to accounting and to its

management part which manage and control the accounting process.
Accounting process includes financial accounting, cost accounting and internal
controls. Financial accounting includes book-keeping, forecasting and
analyzing accounting data. All parts of accounting are aiming to inform external
and internal information users.

On the other side, management part of accountancy includes planning,

organization and human resources management and control of accounting
process. This operations should be consistent with the principles of ethics, but
they also includes risk management.

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Figure 3: Accountancy and social responsibility

ACCOUNTANCY

ACCOUNTING MANAGEMENT IN ACCOUNTANCY

FINANCIAL ACCOUNTING INTERNAL CONTROLS

PLANNING

Book-keeping ORG. AND HR

COST ACCOUNTING
CONTROLLING
Forecasting ETICS RISK STRATEGY
Prevention Sustainable development

Analysing

ECONOMICS
Value added
(stakeholders)
INFORMING
ENVIRONMENT

External Internal SOCIETY

SOCIAL RESPONSIBILITY

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Management in accountancy should be aimed to support the strategy for sustainable
development of the company.

Strategy for sustainable development includes a production of information for decisions

considering three areas: economics, environment and society.

Proper operations of accountancy are to be judged through the principles of social

responsibility. This is shown in the Figure 3 as well.

At first, all information should be true and fair. The whole meaning of fair is in keeping with
the organization's core objective. This means that the principles of ethics which support
sustainable development should be satisfied. However, the fundamental principles the
International Code of Ethics for Professional Accountants (IESBA, 2018) obliged accountants
to comply only with “relevant laws and regulations” (Point 110. A1e) and other classical ethic
principles. Such an obligation could be reasonable for daily operations in accounting, but it is
not enough and should not be enough as a guide for ethics in accountancy science.

In the economic area, there is no place for profit as a goal of company any more. Company
should consider the interests of all stakeholders, which are primary (Boatright, 1999, 169).
Therefore there is triple bottom line statement2 most important for external and internal
reporting.

The information, which best consider the interests of main stakeholders is based on surplus
added value, which means a company's contribution to social's well-being.3

In the manner described above, Figure 3 presents the effects of social responsibility on
accounting information, management of accounting and accountancy as a whole.

4 Conclusion

Based on the thinking presented in the previous chapters, the following findings are
particularly important:
1) Accountancy in an organization has a broader scope than it is commonly discussed.
2) Accountancy is not, cannot be and should not be, a neutral science because it directly
influences business decision-making. Decisions should consider long-term goals and
social responsibility of organizations.
3) Managing in accountancy must be socially responsible, with the corresponding
consequences for financial professionals and experts as individuals as well.

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2
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3
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