Role of Accounting in Creating Values and Accountability

Principles followed in accepting virtues and rejecting vices in order to uphold and develop peace and stability of individuals, society and state as a whole may be called values. Accepting of good rejecting of bad is the act of values.

Accounting creates values by maintaining transparency of accounts. Since man lives in the society, he has got a social life.

For leading a social life he has to perform financial and material transactions daily. For carrying out these transactions successfully the existence of a sound environment is necessary.

In the process of keeping accounts of these transactions certain rules and regulations and provisions of law are to be followed.

These are followed mainly to ensure law and order for the well-being of the people. To establish financial and social discipline practice of values is essential.

The role of accounting in creating values is stated below;

  • Religious bindings: Keeping accounts of financial transactions and a proper use of God- gifted wealth are the religious bindings of a man.Accounting inspires a man to carry out such duties presenting clear methods and techniques of maintaining accounts.
  • Character: Through the process of recording transactions in the books of accounts and ascertaining profit accounting makes a man cautious about accounting.At the same time it helps him acquiring valuable characteristics – punctuality, dutifulness, sincerity and conservatism.
  • Economy and saving tendency: Economy and saving tendency bring financial solvency among people. Profit means excess of revenues over expenditures. Saving is made out of earned profit for future.Accounting practice creates accounts consciousness among people which help them develop the habit of savings and economy.
  • Self-confidence and self-reliance: Self-confidence and self-reliance are the two great qualities of a man. They play a positive role in achieving his ultimate success.Practice of accounting methods and techniques creates accounts consciousness among people. Accounts consciousness helps people to be self-confident and self-reliant.

    Knowledge regarding profit- loss, income-expenditure and budget helps an unemployed man to take up self-employment project and thereby improve the socio-economic condition of a country.

  • Carefulness in paying loan: Loan default, i.e. failure of repayment after taking loan is a social crime.Accounting helps study debt repayment capability of the borrower by providing necessary data and information. A borrower can foresee the probability of his becoming defaulter which indirectly plays role in creating values.
  • Discouraging black marketing: Buying and selling of goods through black market is a punishable crime. It destroys the values of people.Keeping accounts of these types of transactions contradicts the main principles of Accounting. This has an indirect influence on the creation of values.
  • Discouraging fraud and forgery: Through accounting corrupt people are identified easily.So, people concerned become aware of funds misappropriations, irregularity, misuse and expenditure beyond budget which indirectly helps creating values.
  • Discouraging hoarding: Making excess profit through creating artificial crisis of goods is another severe social crime. This is one of the manifestations of decaying values.The principles of accounting do not recognize earning this sort of profits at all. Any person or organization engaged in this type of activities is proved guilty on the basis of recorded documentary evidences and statements of accounts.

    So, the person or organization concerned refrains from doing these activities which is mentionable as indirect influences of accounting.

Being accountable to others for one’s actions is called accountability. Man is used to leading a social life. People living in society are accountable directly or indirectly to some other person / persons or organizations.

Man becomes autocratic in the absence of accountability. There is better system of accountability for financial activities if accounting principles are followed.

From proper keeping of accounts of financial transactions arid with the help of these accounts preparing financial statements, operating results and financial petition of a concern are ascertained.

In preparing accounts and financial statements, accounting concepts and principles are to be followed in the accurate, proper, reliable and honest way.

Accountability has been created in the field of accounting through the long practice and following of these processes. Some aspects for creating process of accountability in accounting are stated below;

Accountability for expenditure

In accounting budget process prior allocation of amount of expenditure for each head is fixed up. The actual expenditure cannot exceed the budgetary amount. For excess expenditure persons concerned are accountable to the proper authority.

For example, fuel expenditure $30,000 per annum was allocated for the car of the manager. But actual fuel expenditure was $40,000. The manager is liable for the excess expenditure of $10,000.

In this situation legal action can be taken against the manager. Punitive measure or legal action to any extent depends on the managers’ clarification about the matter. This is one of the best examples of accountability.

Accountability in success and failure of activities

Every work is evaluated through accounting principles. The success and failure of work of an individual are determined through this evaluation. Here the question of accountability arises. For example, David is a sales manager of an organization.

The organization sustained a loss for sale of goods as the manager was engaged in his personal work. He is accountable to the authority for this loss.

The extent of punitive and legal actions depends on how he does clarify the matter. This is one of the best examples of accountability.

In the light of above discussion it may be conclude – Accounting plays a vital role in establishing a civil society by creating human values and accountability among the persons engaged in each activity of personal, social and national life.