- For along time accountants have focused their attentions on measurement of profits (income theory) , But in the past five decades :

1. The changing social trends .2. Development of technology.3. Quantitative methods .

Shift the attention towards decision theory.- The essential purpose of accounting now is providing

information for decision making. - Decision-making has two facets : 1- problem solving. 2- prediction.

1. Decision Theory .

See page 14

- The logical sequence of events in decision-making process are:

1. Recognition of problems. (need for a decision).2. Defining all the alternative solutions to the

problems.3. Gathering all the information relevant to those

alternative solutions.4. Assessing and ranking the merits of the alternative

solutions.5. Deciding upon the best alternative solutions .6. Validating the decision by means of information

feed back.

1. Decision Theory .

- Measurement theory deals with the problem of assessing or evaluating data .

- The accounting measurement should represent the truth , measurement should be relevant and useful , because rational decision making basically depend on clear information .

- There are three problems of measurement:1. What events or objects should be measured?2. What standard or scale should be used?3. What should be the dimensions of the unit of

measurement?

2.Measurment Theory

See page 15

The objects or events selected for measurement should reflect the objectives of business decisions clearly.

The monetary unit or measurement scale in financial statement in current practice is normal unit of money- that is unadjusted for changes in purchasing power of money over time (Inflation, Deflation) .

An ideal measurement scale would be one that is stable over time .

2.Measurment Theory

Measurement should possess a high degree of predictive ability.(useful in decision making)

2.Measurment Theory

An information is: a fact , datum , observation , or any other thing that adds to knowledge.

An information is: a processed data. Accounting is one type of information as would

be seen in exhibit:

3.Information Theory

See page 16

Accounting is one type of information

InformationConsist of

Nonaccountinginformation

Nonquantitativeinformation

Quantitativeinformation

Consist of

Accountinginformation

Consist of

Operatinginformation

ManagementAccounting

Financialreporting

The purpose of information is to enable an organization to reach its objectives by the efficient use of its resources.

Information theory deals with the information as a resources.

So, the information theory implies that the efficiency of the utilization of information as a resources is measured by matching the costs of information against the benefits .

3.Information Theory

The cost should be less than the benefits. Costs include collection , processing , and distribution the information output.

In sum, the information theory applies that production of information should be determined by cost-benefit analysis .

3.Information Theory

The economic ,social ,legal , political ,and other environment keep changing in a country as time passes . Since accounting systems operate in these environment they have to be in tune with the changing environment .

These environment in particular has great influence on accounting structures and processes.

Accounting Environment

See page 18

We have noticed that as the environment changes , accounting structure, systems, and process also change.

Due to developments of quantitative methods and behavioral sciences , the focus of interest has shifted to decision making

Accounting in a Changing Environment

See page 20

Role of accountant: for the past 25 years , accounting has been regarded as a system that provides information to users . The role of accounting is fast changing due to changes in the economic and social environment

Accounting ,therefore, should become an overall system that measures and directs the performance of all components of an organization.

Accounting in a Changing Environment

Accounting will become the central (focal) point for measuring and evaluating the functioning of different functionaries of an organization.

Accountant will play a major role in organization and evaluating all these. He will play the role of an enabler to the top of decision maker.

It is thus clear that accounting structures and process are influenced by changing environment.

Accounting in a Changing Environment