January 6, 2014

Presentation On Why Can Accounting Not Become A Science Like Physics?


Why Can Accounting Not Become A Science Like Physics?

·   Presentation & preparation of this topic have been made based on the review article of Edward Stamp, who accepted Professor Robert R. Sterling’s  challenge on “Accounting can solve its problem by becoming a science like Physics”.

·  This review article was published in the journal of ‘ABACUS’ in its ‘Spring 1981’ issue; by the “Accounting & Finance Foundation” of “University of Sydney”.
 
·   In his review, Edward Stamp proved that there is no prospect that Accounting can ever parallel the development of Physics, because the nature of physical reality is totally different from the reality with which accountants must deal.


Throughout the presentation we will cover some important aspects like as:

·         The concept of Science, its nature & characteristics.
·         Physics as a Science.
·         The concept of Accounting.
·         Is Accounting a science or others? (A comparative discussion among Law, Mathematics & Accounting)
·         A comparative discussion between Physical Science & accounting.



Science: what is it?

·         Generally,  Science is a body of systematic knowledge.
·         Science is a system of knowledge. A system consists of a number of things which are related together in a particular way so as to serve a particular purpose. The proper understanding & explanation of facts lead to the development of Science.
·         In Science, there is an inherent tendency of knowing & understanding facts.
·         In Science, a meaningful relationship between facts is established through rational explanation.

Science is of 2 types:
                   I.            Deductive or formal, &
                II.            Inductive or empirical.

                 (i)            In a Deductive process, the system is developed through definitions, axioms & inferences in which conclusions are developed from a deductive method of reasoning. Pure mathematics is an example of formal science.
               (ii)            In Inductive process, the system is developed based on experience. i.e. knowledge is obtained by observation. Facts about the human life that is social-sciences, like Economics, is based on observation.


Science: Its nature & characteristics

·         Science is a system. It’s a system where so many facts are related together.
·         Science is empirical in nature. In science, knowledge is obtained by observations.
·         Science is based on critical discrimination.
·         Science consists of general explanations & principles.
·         Science is self-correcting in nature. Whenever new facts are found, the old conclusions are revised; if the new facts demand so.
·         Science formulates laws. Facts are explained with references to laws. Laws are explained by constructing theories which relate the laws to a coherent system.
·         Another feature of science is its function of prediction. On the basis of laws, science can predict the happening of certain events.



Physics as a Science

·         Physics is the general analysis of nature, conducted in order to understand how the universe behaves. A physicist makes objective and indicative measures of natural phenomena, or states of nature, that are relevant to the problem he or she wishes to solve. Physicists use the scientific method to test the validity of a physical theory, using a methodological approach.
·         So we can say that, physics is a natural science that involves the study of matter and its motion through space-time, as well as all applicable concepts, such as energy and force. Scientific computation is an integral part of physics and the field of computational physics is an active area of research.
·         Physics is ultimately concerned with descriptions of the material world, it tastes its theories by comparing the predictions of its theories with data procured from observations and experimentation to arrive at a statistical estimate of the true length with a high degree of precision.

·         Physics is also intimately related to many other sciences, as well as applied fields like engineering and medicine. Physics is often said to be the “fundamental science”, because each of the other disciplines (Chemistry, biology etc.) deal with particular types of material systems that obey the law of physics.
·         The facts and mechanisms of physics are open to discovery but they are independent of human beings, and the physicist deals with a world which would still exist without any scientists. The world of physics is concerned with universal statements which are entirely generally with respect to both space and time.
·         The laws of physics operate because of some unknown, unseen and nonhuman agency that we cannot begin to understand but which many people regard as divine. Physical laws are self-enforcing. We discover them, but we cannot make them.

So in short we can conclude that, because of some natures that are common to both physics and science such as observation, experiment, explanation, empirical nature, laws and theory physics can be referred as science.


Nature of Accounting
·         Accounting is the identification, measurement and communication of financial information about economic entities to interested persons,
Arose from the need to communicate financial information.
·         A more comprehensive definition of accounting is provided by Ansari, Bell, Klammer, Lawrence who state that it consists of 4 key ideas:

§  It is by nature a measurement process;
§  Its scope includes financial and operational information;
§  Its purpose is to assist the organization in reaching its strategic objectives; and
§  Its attributes are to enhance the understanding of the measured phenomenon, and provide information for decision making,  and therefore encourages action and supports and creates shared values, beliefs and mindsets.


·         As an information science, accounting generates information on past events (i.e., what has happened) and generates predictions of possible future outcomes (i.e. Evaluations of  available alternatives for decision making purposes). The accounting measurement systems consists of  three independent units:
§  The physical good/service unit – The want of satisfaction item.
§  The money unit – The measuring device and exchange mechanism.
§  The Time unit – The interval during which events occur.

·         Accounting is comprised of general principles pertaining to the environment from which it draws and service. It is an administrative information science. It is concerned with events and measures relevant to efficient organizational control and planning.


Some Other Issues related to Accounting According To the Journal

·         Accounting deals with a system which is a human creation, designed to human need, and which must be useful. As it deals with a system created by people, hence its fundamental characteristics are constantly changing and evolving.
·         Accountants employ concepts such as “truth” and “fairness” that are value-laden, although it is generally thought that neutrality between the various interested parties is an important objective of external financial reporting.
·         Accountability measures are not additive because when all the assets of a firm are valued on the same basis (such as net realizable value) the sum of the individual values seldom if ever equals the net realizable value of the group as a whole.
·         Thank You All

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