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You are required to reply to 2 other classmates’ threads, and each reply must be at least 250 words in length. Your replies should be substantive and add new information concerning the subject matter of your other classmates’ cases. Each reply must cite at least 1 source. Acceptable sources include peer-reviewed journal articles, FASB Codification, the textbook, and the Bible.
Book: Financial Accounting Theory https://bookshelf.vitalsource.com/#/
One of the reasons the United States economy has been able to grow and flourish is because of the ability to raise capital for business ventures. It was in the late nineteenth century when England created the classification of the “corporation” which allowed people to group money together and become joint owners of a business without necessarily being the operating managers. It essentially created what we know as shareholders. The idea that now owners can be separated from the business operations “created a need for periodic reporting as well as a need to distinguish between capital and income” (Cathey, Clakr, Schroeder 2014). These shareholders certainly wanted a way to determine whether the company which they invested in is making money or losing money. Since those shareholders are not part of the everyday operations of the company they would have no idea how the company is doing. So the need for periodic reporting was very important to the shareholders so that they could keep a watchful eye over how the company was doing without needing to be part of the everyday operations. Another important distinction that shareholders wanted to see is the separation of income and capital. Shareholders were interested in making sure that not only the products or services that were being sold generated income but they were also concerned about whether their investment into the company was also growing. As more and more corporations began starting up, it meant there were now more corporate owners that had nothing to do with the daily operations of the company and would be solely relying on the numbers that were being presented to them. In the bible Jesus teaches us to love one another and treat one another as you would want to be treated. Jesus also teaches us about being honest and not cheating. “They did not require accounting from those to whom they gave the money to pay the workers, because they acted with complete honesty” (2 Kings 12:15). Unfortunately, not all people take the words of the bible or the teachings of Jesus to heart. The possibilities of someone intentionally changing the numbers, in which shareholders depend on, to deceive the shareholder into believing the company is profitable and growing was certainly a risk. As the industrial revolution began to hit in America and corporations were now flourishing and shareholders investing, the risk became a reality and the role of accountants started to become more and more important.
God Bless,
Brian Gilbert
Cathey, M., J., Clark, M., W., Schroeder, R., G. (2014) Financial Accounting Theory and Analysis. Eleventh Edition. John Wiley & Sons Inc.
New International Version: Holy Bible (2011). 2 Kings 12:15. Grand Rapids, Mich.:Zondervan
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