What role can theory play in relation to accounting? give an example.?

Question

What role can theory play in relation to accounting? give an example.?

Answer 1

I think theory is a way to go beyond bookkeeping.  You can teach almost anyone to code a transaction and enter it into the computer, but sometimes it requires the knowledge of theory to go beyond the usual.  For instance, let's say that you have a bakery; you make cakes and then you deliver them to your customers.  Your largest supplier happens to be the flour company.  Your truck breaks down and you decide it's time to replace it.  Your flour company calls to tell you that they are liquidating part of their fleet because of gas prices and they are selling them all cheap.  You buy it.  The bookkeeper, if he doesn't go past his usual routine, will likely charge the purchase to flour and doing so will overstate your material expense and understate your assets.  Had he applied some theory to the situation, he would have likely looked at the transaction and realized that it wasn't an expense at all, but a truck.