MASTER SYLLABUS

AKU 4106 – ACCOUNTING THEORY

Prerequisite: AKU3105 Advanced Accounting II
Credit Hours: 3

Instructor:

Course Description
The course is designed to help students learn accounting theory. The class is not a technical
accounting class, but a conceptual one. The discussion in this class will cover the elements,
structure, development, and methodology used in accounting theory. The class is more oriented
to the normative part of accounting theory. However, an introduction to positive accounting
theory will also be discussed. The discussion will also include theory concerning balance sheet,
income statement, cash flow statement, international accounting, and accounting for inflation.

Course Objectives
After taking the course, students should be able to:
1. Identify environments influencing the making of accounting standards.
2. Describe the role of measurement in accounting.
3. Describe the difference between deductive and inductive reasoning in developing accounting
theory.
4. Identify the direction in accounting research.
5. Understand the history of and reasons for accounting standard setting.
6. Identify concepts, objectives, and conceptual framework underlying financial accounting.
7. Describe positive accounting theory.
8. Describe the uniformity and disclosure problems in accounting.
9. Describe the development of international accounting standards.
10. Describe conventional and inflation measurement concepts for elements of financial
statements.

Course Materials
1. Wolk, Harry I., James L. Dodd, and John J. Rozycki. Accounting Theory-Conceptual issues
in a Political and Economic Environment. 8th Ed., 2013. California: Sage Publications, Inc.
2. FASB. The Statement of Financial Accounting Concepts No. 5, 6, 7, and 8
3. IAI. Juni 2012. Standar Akuntansi Keuangan. Jakarta: IAI.

Student’s Responsibilities
1. Class meeting will be used by the lecturer to confirm student’s understanding of the
underlying concepts of accounting. Students should read the chapter assigned and are
required to do and submit the individual homework assigned and group assignment before
each class meeting.
2. Students are expected to attend all scheduled class meetings. Absence from class meetings
shall not exceed 25%. Students who exceed the 25% limit without a medical or emergency
 excuse acceptable to and approved by the Associate Dean of Academic shall not be allowed
to take the final exam and shall receive a grade of E from this course.
3. Operating laptop, mobile phone, and other communication devices are strictly prohibited
during class meetings. Any student found operating these devices should leave the class and
will be considered as an absence for the class meeting.

Academic Integrity
Academic integrity forms a fundamental bond of trust between colleagues, peers, lecturers, and
students, and it underlies all genuine learning. There is no tolerance for plagiarism or academic
dishonesty in any form, including, but not limited to, viewing the exams of others, sharing
answers with others, using books or notes while taking the exam, copying answers or papers, or
passing off someone else’s work as one’s own. A breach of ethics or act of dishonesty can result
in A FAILURE OF AN ENTIRE COURSE (a grade of “E”).

Teaching Methods
A combination of lecturing, discussion, and problem solving will be applied to this class.
Lecturing is purpoted to confirm student’s understanding of some underlying financial
accounting concepts. Most of the lecturing will be directed to discuss and answer student’s
questions. Hence, the most important requirements for this course are a thorough preparation and
reading materials and active participation in the classroom.

Grading
Your grade will be determined based on your total score on the following items:
Mid Exam 30%
Final Exam 30%
Quizzes 20%
Discussion and homework 20%
100%
Your final score will be mapped to a course grade based on the following scheme:
A 90 or above C+ 65 to 69
A- 85 to 89 C 60 to 64
B+ 80 to 84 D 50 to 59
B 75 to 89 E below 50
B- 70 to 74

Course Outline

Week Topic Reference Homework

1 Revew of Syllabus; Syllabus Handout;
An introduction to accounting Wolk Ch. 1.
theory:
1. Accounting theory and policy
making;
2. The role of measurement in
accounting.
2 Accounting theory and accounting Wolk Ch. 2.
research:
Week Topic Reference Homework
1. Accounting research and scientific
method;
2. Is accounting an art or a science?
3. Directions in accounting research;
4. A scientific revolution in
accounting.
3 Development of the institutional Wolk Ch. 3.
structure of financial accounting:
1. Accounting in US prior to 1930;
2. Formative years, 1930-1946;
3. Postwar period, 1946-1959;
4. Modern period, 1959 to the
present.
4 The economics of financial reporting Wolk Ch. 4.
regulation:
1. The case for unregulated markets
for accounting information;
2. The case for regulated markets for
accounting information;
3. Imperfections of accounting
regulation;
4. The regulatory process;
5. Economic consequences of
accounting policy.
5 Postulates, principles, and concepts: Wolk Ch. 5.
1. Postulates and principles;
2. Basic concepts underlying
historical costing;
3. Equity theories.
6 The search for objectives: Wolk Ch. 6.
1. A Statement of Basic Accounting
Theory (ASOBAT);
2. Accounting Principles Board
(APB) Statement 4: Basic Concepts
and Accounting Principles
Underlying Financial Statements of
Business Enterprises;
3. The Trueblood Committee Report;
4. A Statement on Accounting Theory
and Theory Acceptance (SATTA);
5. User objectives and user diversity.
7 The FASB’s and IAI conceptual Wolk Ch. 7; SFAC No. 5, 6, 7,
framework: and 8 (FASB); PSAK Framework
1. The FASB’s conceptual for the Preparation and
framework; Presentation of Financial
2. The conceptual framework as a Statements.
codificational document;
3. Empirical research on the
conceptual framework;
Week Topic Reference Homework
4. Assessing the conceptual
framework.
MID EXAM
8 Usefulness of accounting information Wolk Ch. 8.
for investors and creditors:
1. Earnings, dividends, and stock
prices;
2. Residual income models;
3. Background o risk and return;
4. Introduction to capital markets
research in accounting;
5. The value of accounting
information: evidence from return
data;
6. The value of accounting
information: evidence from direct
valuation;
7. Accounting data and creditors;
8. Importance of earning forecasting;
9. Empirical research and standard
setting.
9 Uniformity and disclosure—some Wolk Ch. 9.
policy making directions:
1. What underlies the choice among
accounting methods?
2. Uniformity;
3. The usefulness of accounting
allocations;
4. Disclosure.
10 The balance sheet: Wolk Ch. 11.
1. The relationship between the
balance sheet and the income
statement;
2. Assets;
3. Lliabilities;
4. Owner’s equity;
5. Financial instruments;
6. Classification in the balance sheet.
11 The income statement: Wolk Ch. 12.
1. Income definitions;
2. Revenues and gains;
3. Expenses and losses;
4. Future events and accounting
recognition;
5. Current operating versus all-
inclusive income;
6. Nonoperating sections;
7. Earnings per share;
8. Special subjects concerning income
Week Topic Reference Homework
measurement;
9. Earnings management;
10. Income statement developments.
12 Statement of Cash Flows: Wolk Ch. 13.
1. The statement of changes in
financial position;
2. The motivation for a cash flow
statement;
3. Requirements of the cash flow
statement;
4. Classification problems of SFAS
No. 95;
5. Analytical usefulness of the cash
flow statement;
6. Cash and funds flow research;
7. Improving the statement of cash
flow.
13 Accounting for changing prices and Wolk Ch. 14.
inflation:
1. Institutional aspects of inflation
accounting prior to SFAS No. 33;
2. An overview of inflation
accounting;
3. Provisions of SFAS No. 33 and
rejection in SFAS Nos. 82 and 89;
4. SFAS No. 157;
5. SFAS No. 159.
14 International accounting: Wolk Ch. 10.
1. National accounting differences;
2. International harmonization of
accounting standards
FINAL EXAM