Chapter 22: Social Accounting and Ethics

 Accounting Decisions
o Examples:
 Acquiring and Disposing Non-current Assets
 Closing a loss-making department
 Introducing a new partner to the partnership
 Changing employee remuneration method
 Changing raw materials of a product
o Standard Assumption: Accounting Decisions are made for one purpose only to
maximize profits and returns for owners
 Social Accounting
o However, accounting decisions will also impact other stakeholders in society such as:
 National and local governments
 Employees
 Local Community
 Suppliers
 Customers
o Each stakeholder may have very different objectives and so each accounting decision
will impact them differently
o Definition: Accounting that also takes into consideration the social context in which
the business operates when decisions are made
o Social Contexts include:
 The impact of decisions on the local community
 The impact of decisions on the natural environment
 The impact of decisions on the workforce
 The impact of decisions on the health and safety of others
 Ethics
o A set of moral principles or values that tells us how to behave well and what is
considered bad behaviour
o Ethical Accounting:
 Financial Statements prepared should give a ‘true and fair’ view of the
company’s financial position
o Unethical Accounting:
 Financial statements fail to follow accounting principles and accounting
standards
 Examples:
 Inflating revenue by recording sales that have yet to be realized
 Treating revenue expenditure as capital expenditure
 Overstating the value of inventory
 Overstating the value of trade receivables