APPROACHES AND THEORIES OF ACCOUNTING

1. ANALYSIS

1.1. DIFFERENT APPROACHES, PRINCIPLES AND THEORIES OF

ACCOUNTING.

1.1.1. APPROACHES TO ACCOUNTING

 The legalistic approach

Although it is the one that predominates from the origins, where it really
culminates is in the Personalist School, this being the reason why it is
based on the conception and principle of the Personalist School.

 The economic approach

Although it is actually located in the Materialist School, where it acquires
its highest point, it is in the German Doctrine with Professor Schneider
and is based on the information provided by Accounting serving as a
foundation for the company's economic and financial decision making. .

 The formalized approach

From this point of view, Accounting is considered an information
science, arising as a consequence of the application to Accounting of
techniques such as operational research, axiomatization, Set Theory,
matrices, etc.
This formalization is still carried out under an economic conception, but
under the application of a different and more formal materialist
instrumentation, so one could speak of a formalized economic approach
rather than a formal approach.
In this approach, although Accounting has not yet ceased to be economic,
it has done so in the sense that it is already known that it is also
applicable to phenomena that have a circulatory structure, that is, to
animals, plants, etc.
The two most outstanding authors in this approach are Mattessich and
Yuji Ijiri.

 Continuist or evolutionary approach

From this point of view it is understood that science develops in an
evolutionary way, the truth is only one of which we have greater and
greater knowledge, that is, each moment of science proceeds from the
previous one successively and without rupture.

 Disruptive or discontinuous approach

From this point of view, each stage cancels the previous one, that is,
none of the above is valid, therefore the scientific development and
perfection of a science is formed on the basis of rupture, that is, at a
given moment there is no according to existing theories and they are
reformed or rejected, new ones emerging, in this way each situation that
acquires the truth cancels the previous one, within this position we must
 highlight KUHN, who explains this approach through the three
concepts:
o Paradigm: Set of scientific theories accepted by a scientific
community.
o Normal science: Normal paradigm process.
o Scientific revolution.

 Teleological approach
Under this point of view, a cause-effect relationship is established
between the present and the past, so that the past has led to the present.

 Recurring approach
This is the one with which accounting most identifies and establishes
that a critical analysis of the past must be carried out to see, from this
past, which theories are still valid and which are outdated, that is, in a
selective analysis; As a consequence of this, the past is distinguished in
this approach as:
o Past or history obsolete or surpassed , this will be the set of
theories of the past already surpassed that have ceased to be
valid (rupturist approach).
o Past or sanctioned or current history which are the set of past,
but still current, valid or updateable annotations (continuist
approach).
 Financial Cost Management
Accounting is a technique that deals with recording, classifying and
summarizing the commercial operations of a business in order to
interpret its results.
Consequently, through accounting, managers or directors will be able to
orient themselves on the course of their businesses through accounting
and statistical data. These data allow us to know the stability and
solvency of the company, the flow of collections and payments, sales
trends, costs and general expenses, among others. So that the financial
capacity of the company can be known.

 Financial Accounting and Its Objective

o It is the one that focuses on the fundamental financial
statements: the Balance Sheet, the Profit and Loss statement and
the Flow of Funds statements.
o This approach is useful specifically for third parties, i.e.
shareholders, creditors, investors and tax offices.
o Of course, Management also uses this information, but it also
needs other types of data that cannot be found in financial
accounting because it has a unified structure as it is governed by
defined rules and generally accepted principles.
o One of the main purposes of financial accounting is to provide
information about: the results of financial operations and the
financial position of the entity. The financial statements are
expected to conform to generally accepted accounting principles
that are consistently applied in the accounting profession. The
 information contained in the statements is largely directed to
outside groups for investment or compliance purposes.
 Cost Accounting Concept
It is an area of accounting that includes the predetermination,
accumulation, registration, distribution, information, analysis and
interpretation of production, distribution and administration costs.

1.1.2. PRINCIPLES OF ACCOUNTING

 Equity:
Fairness between competing interests should be a constant concern in
accounting, since those who rely on or use accounting data may find
their particular interests in conflict. From this it follows that the
financial statements must be prepared in such a way that they fairly
reflect the different interests at stake in a given farm or company.

 Entity:
Financial statements always refer to an entity where the subjective or
proprietary element is considered a third party. The concept of "entity"
is different from that of "person" since the same person can produce
financial statements for several "entities" that he or she owns.

 Enconimics goods:
The financial statements always refer to economic assets, that is,
tangible and intangible assets that have economic value and therefore
capable of being valued in monetary terms.

 Account Currency:
Financial statements reflect equity through a resource that is used to
reduce all its heterogeneous components to an expression that allows
them to be easily grouped and compared. This resource consists of
choosing a currency of account and valuing the assets by applying a
"price" to each unit.
Generally, the money that is legal tender in the country within which
the "entity" operates is used as the currency of account and in this case
the "price" is given in units of legal tender money.
In those cases where the currency used does not constitute a stable
standard of value, due to the fluctuations it experiences, the validity of
the principle supported is not altered, since correction is feasible
through the application of appropriate adjustment mechanisms.

 Going Company:
Unless expressly indicated otherwise, it is understood that the financial
statements belong to a "going concern", considering that the concept
that informs the aforementioned expression refers to any economic
organism whose personal existence has full validity and future
projection.

 Cost Valuation:
The cost value -acquisition or production- constitutes the main and
basic criterion of the valuation, which conditions the formulation of the
 so-called "statement" financial statements, also corresponding to the
concept of "going concern", which is why This norm acquires the
character of principle.
This statement does not mean ignoring the existence and origin of other
rules and criteria applicable in certain circumstances, but, on the
contrary, it means stating that in the absence of a special circumstance
that justifies the application of another criterion, that of " cost" as a
basic valuation concept.
On the other hand, fluctuations in the value of the currency of account,
with their consequences of corrective measures that affect or modify the
monetary figures of the costs of certain goods, do not also constitute
alterations to the expressed principle, but, in substance, constitute mere
adjustments to the numerical expression of the respective costs.

 Exercise:
In ongoing companies, it is necessary to measure the results of
management from time to time, whether to satisfy administrative, legal,
or fiscal reasons or to meet financial commitments, etc. It is a condition
that the exercises be of equal duration, so that the results of two or more
exercises are comparable to each other.

 Earned:
The equity variations that must be considered to establish the economic
result are those that pertain to a fiscal year without considering whether
they have been collected or paid.

 Objectivity:
Changes in assets, liabilities and in the accounting expression of net
worth must be formally recognized in the accounting records, as soon
as it is possible to measure them objectively and express that
measurement in currency of account.

 Realization:
Economic results should only be computed when they are carried out,
that is, when the operation that gives rise to them is perfected from the
point of view of the applicable legislation or commercial practices and
all the risks inherent to such operation have been fundamentally
weighed. It must be established in general terms that the concept
"realized" participates in the concept accrued.

 Prudence:
It means that when a choice must be made between two values for an
element of the asset, the lower value must normally be chosen, or a
transaction must be accounted for in such a way that the owner's rate is
lower. This general principle can also be expressed by saying: "account
for all losses when they are known and gains only when they have been
realized."
Exaggeration in the application of this principle is not advisable if it
results in detriment to the fair presentation of the financial situation and
the results of operations.
  Uniformity:
The general principles, when applicable, and the particular standards
used to prepare the financial statements of a given entity must be
applied uniformly from one year to the next. The effect on the financial
statements of any significant change in the application of the general
principles and particular standards must be indicated by means of an
explanatory note.
However, the principle of uniformity should not lead to maintaining
unaltered those general principles, when applicable, or particular rules
that circumstances recommend being modified.

 Materiality (significance or relative importance):

When considering the correct application of general principles and
particular rules, one must necessarily act with practical sense. Situations
frequently arise that do not fit within those and, however, do not present
problems because the effect they produce does not distort the general
picture.
Of course, there is no demarcation line that sets the limits of what is and
is not significant and the best criteria must be applied to resolve what is
appropriate in each case, according to the circumstances, taking into
account factors such as the relative effect in assets or liabilities, in
equity or in the results of operations.

 Exposure:
The financial statements must contain all the basic and additional
information and discrimination that is necessary for an adequate
interpretation of the financial situation and economic results of the
entity to which they refer.

1.1.3. THEORIES OF ACCOUNTING

 Anglo-Saxon School
In this model, the absence of the scientific method and the non-
identification of the object of accounting knowledge is noted,
empiricism and the absence of scientific research are maintained. Well,
it arises from a draft opinion of companies on the fundamental theory of
accounting where the characteristics of accounting information are
established (Usefulness, relevance, objectivity, timeliness, precision,
integrity, clarity, sufficiency).
The expression “Generally Accepted Accounting Principles” is
eliminated and two categories of accounting standards are established:
Qualities of accounting information and Accounting rules.

 Latin School
It is characterized because the object of accounting knowledge is
economic-social activity, finding three elements that are the State,
Organizations and the Community in general, which interact with each
other in a social environment.
It arises from a research program that contains the foundation of an
epistemology as a prior step and subsequent formulation of a scientific
 theory, as a criterion for the evaluation of administrative efficiency and
the development of social accounting.
In summary, the formulation of a scientific theory must be based on
epistemology, considering:
o The inductive, deductive, historical analytical and synthetic
methods in his intellectual work.
o Dialectical approaches that allow a treatment in accordance with
the changing situation of contemporary reality.
o The importance of communication theory as a method of
understanding the different particularities of the accounting
discipline.
o The importance of systems as a method of knowledge of the
specificities of accounting.
1.2. APPROACHES AND THEORIES OF ECONOMY

1.2.1. APPROACHES

 Objective Approach to the Economy

The definition of the objective current comes from Federico Engels
who points out: “Political economy is the science that studies the laws
that govern the production, distribution, circulation and consumption of
material goods that satisfy human needs.”
The philosophical basis of the current is dialectical materialism, which
states that it refers to the concept of labor-value, by which value has its
objective origin in the amount of work required for the production of
goods.
The main characteristics of the objective stream are:
o What is important is not the subject, but the object; That is, the
set of economic-social relationships that are established between
men to solve their economic problem.
o The economic system is changing, it evolves and develops
through the actions of men themselves.
o It is based on dialectical materialism and, therefore, on
dialectical logic.
o Economy is historical because human needs and the way to
resolve them change over time.
o It starts from reality to develop concepts and categories that are
integrated into a body of knowledge that is theories, until
formulating economic laws that explain concrete reality.
o Widely uses the deductive method; That is, starting from general
conceptions, particular facts and phenomena are explained;
Logical definitions are deduced that explain concrete reality
until laws are developed.

 Subjective approach to economics

The classic definition of the subjectivist orientation is by Lionel
Robbins, who says: “Economics is the science that is responsible for the
study of the satisfaction of human needs through goods that, being
scarce, have alternative uses between which we must choose.”
 The subjective approach to economics states that the satisfaction of
needs must be limited to superficial and sensory well-being, contrary to
the objective theory, which states that the satisfaction of needs must be
carried out in the external and observable world. not from the psychic
or psychological. The subjective current is based on the principles of
formal logic: the principle of identity, the principle of non-contradiction
and the principle of the excluded third.
o Principle of identity: study of facts and phenomena as they are,
without change, immutable, without variation, static, etc.
o Principle of non-contradiction: things cannot have elements that
contradict them. They have certain characteristics, they cannot
have contradictory elements.
o Principle of the excluded third: explains the facts and
phenomena as they occur, without changes, knowing that two
denials of the fact affirm something.
The subjective current also follows the inductive method (starting from
particular facts to arrive at general phenomena). Part of the individual;
The economic subject is the basis of the studies of this current. On the
other hand, the social economic system is a given fact, something that
does not change.

1.2.2. THEORIES OF ECONOMY

 Mercantilism
Doctrine of economic thought that prevailed in Europe during the 16th,
17th and 18th centuries, basically consisted of the State having to
exercise tight control over industry and commerce to increase the power
of the nation by ensuring that exports surpassed in value imports..
Privileges vis-à-vis the community and the state gave way to merchant
organizations of different classes that developed nations. Extreme
outbreaks of nationalism developed in the countries, this led to great
political and social changes. The economic power of a nation was
calculated in the amount of gold, silver and other precious metals it had
in its coffers. Mercantilism was very successful in stimulating the
growth of industry, but it also provoked strong reactions against its
postulates. The use of the colonies as suppliers of resources and their
exclusion from commercial circuits gave rise, among other reasons, to
events such as the American War of Independence, because the
colonists sought to freely obtain their own economic well-being. In
England the most important intellectual was Gerard de Malynes and in
France it was Colbert who was Louis XIV's finance minister.

 Physiocracy
School of economic thought that emerged in France in the 18th century
and the first to apply the scientific method to economics. The main
exponent of physiocracy was François Quesnay, other notable
physiocrats were Pierre Samuel du Pont de Nemours and Victor
Riqueti. The physiocrats were opposed to the prevailing economic
 doctrine until then, mercantilism, so they regulated international trade
to prevent the country's gold and silver reserves from leaving the
country. The physiocrats, who believed in the existence of a natural
law, defended an economic policy of laissez-faire (or non-public
intervention in the economy) that according to them would naturally
produce a prosperous and virtuous society, and which was therefore
favorable to free trade. They also defended that agriculture was the only
productive sector capable of creating wealth, while commerce and
industry only allowed the distribution of this wealth; The physiocrats
were against mercantilist international trade policies, which favored
protectionism.
The Physiocrats achieved their greatest political influence when Anne
Robert Jacques Tourgot, one of their supporters, was appointed
Minister of the Economy in France in 1774.

 Classical School
During the second half of the 18th century, the industrial revolution
began in England, bringing new trends to the economy such as the
displacement of artisans, mass production, employers, employees,
working hours and specialization. At this time the classical school
emerged.

Its main exponent was Adam Smith who is called the father of
economics. In his book “The Wealth of Nations” (1776). The most
notable postulates are based on economic liberalism, that is:

o Private property, personal freedom, individual initiative

and control, and entrepreneurial capacity.
o Direct relationship between the division of labor and
market insistence.
o Direct relationship between work specialization and
market expansion.
o Reinvestment of company profits in capital goods.
o Each factor is paid what corresponds according to their
training.
o There is an invisible hand that leads individuals to act for
their own benefit to promote the benefits of society. In this
way, markets allocate resources efficiently to satisfy the
needs of consumers (“let go, let go”).

Another important contributor to this school was Tomas Maltus who

based his studies on agricultural economics at the beginning of the 19th
century. Due to the limited supply of land, it could not expand and this
created an obstacle to economic growth. It was thought that as the
population grew it would inhabit the land itself and food production
could not be expanded rapidly, therefore the number of foods per
person decreased with the increase in population and there would be a
decrease in the population per person. lack of food.
 Another exponent of classicism was David Ricardo who studied
economics from the point of view of relations with other countries.
Proposing international trade as the only alternative for growth under
the concept of comparative advantage, where it is proposed that each
country must specialize in the production of a good where its absolute
advantage is greater with respect to other countries. His labor theory of
value states that wages depend on the price of food, which in turn
depend on production costs, which depend on the amount of labor
necessary to produce food; In other words, labor is the primary
determinant of value.

 Institutionalism
The greatest exponent of institutionalism was Thorstein Veblen (1857-
1929). Institutionalism simply deals with the importance of empirical
studies in the field of economics. It is based on the creation of
institutions or universities that interact with the business world. Also
the creation of institutions for special research to carry out empirical
work in the economic field.

 Neoclassism
Beginning in 1870, economists such as the English William Satanley
and the Austrian Karl Menger shifted emphasis from limitations in
supply to interpretations of consumer options in psychological terms,
concentrating on the marginal utility consumed. Neoclassists explain
market prices not by reference to the different amounts of human labor
required to produce said good, but rather according to the intensities in
consumer preferences for one more unit of any type of commodity.
Another British economist Alfred Marshall produced a work titled
“Principles of Economics” where he explained demand by the
principles of marginal utility and supply by the rule of marginal
productivity (the cost of producing the last item of a certain quantity).
In competitive markets the consumer's preferences for low prices of
goods, and the seller's preferences for high prices were adjusted to a
mutually agreed upon level. At any price level, then, buyers were
willing to buy precisely the quantity of goods that sellers were prepared
to offer.

 Neoliberalism
Unlike state protectionism as was the case in the government of
Belisario Betancurt where the state was in charge of services, education,
subsidies, etc., and with large tariff rates to protect the national
industry, economic neoliberalism opens the economy of a country to
compete abroad. In this way, the participation of the state is reduced
due to the privatization of public companies. This results in the
elimination of subsidies. The private sector prevails and foreign
investment arrives that increases the country's capital. Public spending
is eliminated, bureaucracy is reduced and we basically return to the
times of Adam Smith with his invisible hand.
 Marxism
Within his central planning system, Carlos Marx in his book
“Capital” (1867) highlights the three most important theories
among several, these are:

o Theory of value and wages: This is given by the amount of

labor implemented in it. Therefore the remuneration for
this work must be higher than other factors of production.
o Theory of surplus value: It is the theft carried out by the
employer by not adequately remunerating the worker.
Thanks to this surplus value, capital goods can
accumulate, increasing the social imbalance between
capitalists and employees.
o Theory of class struggle: The ability of the worker to
express his nonconformity by starting unions.

 Keynesian Economics
After the classical school, Western countries began to adopt Adam
Smith's postulates to their economies, the government did not intervene
or intervened very little in the economic management of the nations. It
was until the end of the First World War where the countries involved
faced problems of fallen economies, destruction of infrastructure, war
invalids, populations without basic resources, etc. All nations had to be
rebuilt again.

In this way, John Maylard Keynes, a British economist, arrived, who

participated in the Treaty of Versailles in 1919 with the English
delegation. After this he builds The General Theory of Employment,
Interest and Money (1936). In this work he argues in defense of
economic programs that were already being tested in the United
Kingdom and the United States. Keynes proposes the absence of
automatic adjustment mechanisms that allow the economy to recover
from recessions. He stated that uninvested savings prolong economic
stagnation and that the investment of business enterprises depends on
the creation of new markets, new technical advances and other
variables independent of the interest rate or savings. Since business
investment fluctuates, it cannot be expected to preserve high
employment and stable incomes. Keynes proposed that public
spending should compensate for insufficient private investment
during a recession. Keynes' ideas have had a decisive influence on the
design of the economic policy of many countries since World War II.

 Founders of Political Economy

After the French Revolution, a series of structural changes affected
what would become the economic model adopted by Western countries.
Along with this came the industrial revolution. Of these two elements
we can first have Adam Smith in England, of whom we already spoke,
and Turgot in France. The latter, as mayor of Limousin, improved, had
magnificent roads built, ameliorated the famine by maintaining the free
 circulation of grain and transformed the town of Limousin, becoming a
prosperous town within poor France. Then came Necker who managed
for the first time to open France's markets abroad by making a treaty
with England in 1786, this was called the Franco-English treaty.
We also have Alfred Marshall who established the parameters of supply
and demand, creating a much more direct relationship between the
market and consumers and at the same time the state. Finally there is
Marx who from another point of view exposed his communist system
that influenced Lenin much later for the creation of a communist model
in the Soviet Union in 1917.

1.3. COMPARISON TABLE FROM ADAM SMITH TO KEYNES

CLASSICAL KEYNESIAN
THEORY THEORY
PERSONAL ANALYSIS
Adam Smith John Maynard Keyner
1723-1790 1883-1946
Accumulation The basis of economicAt this point, Smith proposes free trade and
theory expansion and
competition to keep the economy stable and
depression focuses onfluid, if possible without government
the total, or aggregate,
intervention. In Keyner's time this concept
demand for goods or had developed, better it had been
services by consumers,
transformed. The government had to
investors, and the
intervene in the economy through
government. investment, regardless of whether it reached
a budget deficit, and mediate so that new
markets existed with favorable conditions
for economic growth.
The The government must Currently, the Peruvian government has
government is actively participate in legislation for trade and the increase of
an enemy to the formulation of industry in the country, but its intervention
the progress of policies and laws that is such that many companies, especially
the economy. allow dynamism in the medium and small ones, are in serious
economy trouble paying taxes, a situation that has led
to affect their assets. The help they provide
is deficient in my opinion, since throughout
these years small and medium-sized
companies have been hard-pressed to sustain
themselves and if they have not gone
bankrupt, then these policies do not show
the results expected when Keyner assures
that The government must participate and
gives more reason to Smith's planning that
ensures that the government is an enemy to
free development.
The power of Full employment theory Smith argued that the power of man's
selfishness selfishness made social well-being possible
made social through the individual pursuit of personal
well-being interest. Keyner states that the employment
possible of people is the basis of the stability of the
through the economy because the cycle of consumer,
individual producer is allowed.
pursuit of
personal Be that as it may, employment is
interest fundamental, whether in the society of the
17th, 20th or 20th centuries1, it has the same
purpose, satisfying the needs of man. What
changes is the context.

2. COMMENT:
In order to carry out accounting correctly, we learned that the rules and principles
established by the CPCIMCP must be respected, since not only a good accountant
will do things without any basis, now we know the bases of accounting and with
what we learned of the accounting process it will now be easier to apply the
concepts in an accounting practice.

Defining the principles of accounting made me know how much I didn't know about
the subject, since before I thought that the accounting process was the same as
accounting principles, now I know that it is something different from which the
other topics of accounting are based. accounting.

The accounting rule must be accepted as adequate rather than adequate for being
accepted. Any discipline that bases its methodology on positive approaches is said
to be free of value judgments and that its theoretical structure is the basis for both
explaining and predicting phenomena within that discipline, but not for
recommending.

For positivism, the only statements that can be considered scientific are those
subjected to logic and empirical planning and those that are not subjected to logic
are considered absurd or meaningless.
Accountants should take more normativist positions, since by being positivist we
would only limit ourselves to taking the world as it is, on the other hand, and being
normativists we would go further, by recommending what should be done with the
company to change the environment.

Regarding the comparative table:

Theories, like everything else, are perfect on paper, they are ideas that are very well
founded in the ideal, but in reality they are mistreated, modified, changed,
transformed, as best suits the people who are going to apply them. The paper holds
up to everything. It is true that they are the basis of thought, they propose solutions
that are applied, but according to convenience.
They have achieved significant developments, they have allowed continuous
change, both positive and negative. But community awareness is needed to
implement it according to the needs of society and not a small group. It is difficult,
but the consumer is in charge, not the oligarchs.