ACCOUNTING AND OTHER DISCIPLINE

Relationship of Accounting with Economics

Prof. Robbins has defined term ‘economics’ as follows-

“Economics is the science, which studies human behavior as a relationship between ends and scarce means which have alternatives uses.”

However when a person is to take any economical decision, he has to depend mainly on the accounting information. Generally an accountant is concerned with the economic problems of an only one enterprise only, but an economist is concerned with the problems of an industry as a whole.

Micro levels data, arranged by the accounting system, is summed up to get macro level data base. Thus at the macro level, accounting provides the basic data, upon which the economic models are developed.

However, there exists a wide gulf between economists’ and accountants’ concept of income and capital For example, the profit according to an economist is not same thing as the profit according to an accountant. No doubt, accountants have derived the ideas of value, income and capital maintenance from economists, but suitably modified to make them usable in practical circumstances. Thus, Economics and Accounting are close related subjects.

Relationship of Accounting with Mathematics

Knowledge of arithmetic and algebra is a pre-requisite for accounting computations and measurements. Calculations of interest and annuity etc. are some examples of fundamental uses of mathematics in accounting.

Presently graphs and charts are being widely used for communicating accounting information to the users. Thus the knowledge in geometry and trigonometry has become essential to have a better understanding about the accounting communication system.

Relationship of Accounting with Statistics

Collection, Tabulation, Analysis and presentation of data are some primary functions, which are performed by both Accountants and statisticians.

The accountant is mainly concerned with the monetary data, although to some extent, he is also concerned with the quantitative data. But a statistician is concerned equally with the monetary and quantitative data.

The use of statistics is accounting can be appreciated better in the context of the nature of accounting records. Accounting information is very precise; it is exact to the last paisa. But for decision-making purposes, such precision is not necessary and hence the statistical approximations are sought.

Accounting records generally confined to one year, while statistical analysis is more useful if a longer period is taken. For example, a longer period will be required to fit the trend line.

Statistical methods are helpful in developing accounting data and in their interrelation. Therefore the study and application of statistical methods will add extra edge to the accounting data.

Relationship of Accounting with Law

Every business house has to work within legal environment. All the transactions with suppliers and customers are governed by the Contract Act, Sale of Goods Act, Negotiable Instruments Act, etc. The entity, itself, created and controlled by laws. For example a partnership business is controlled by Partnership Act, a company is created and controlled by the Companies Act. Very often the accounting system to be followed has been prescribed by the law. For example the Companies Act has prescribed the format of financial statements.

However legal prescription about the accounting system is the product of development in accounting knowledge. That is to say legislation about accounting system cannot be enacted unless there is a corresponding development in the accounting discipline. In what way, accounting influences law and is also influenced by law.

Relationship of Accounting with Management

Management is a broad occupational field, which comprises many functions and application of many disciplines including statistics, mathematics, economics, etc. Accountants are well placed in the management and play a key role in the management them. A large portion of accounting information is prepared for management decision-making. In the management team, an accountant is in a better position to understand and use such data. In other words, since an accountant plays an active role in management, he understands the data requirement. So, accounting system can be molded to serve the management purpose.