The Usefulness of Accounting Models in Providing Accounting Information in Romania

The Usefulness of Accounting Models in Providing Accounting Information in Romania

Tatiana Dănescu (Petru Maior University of Targu-Mures, Romania) and Luminița Rus (University of Oradea, Romania)
Copyright: © 2019 |Pages: 20
DOI: 10.4018/978-1-5225-7712-6.ch003
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The evolution of the business environment under the impact of globalization highlights the increase of social expectations through which it considers the success of the economic entity, measured and recognized in various forms of expression, based on the indicators of performance in terms of accounting information. The purpose of this chapter is to present the models of “cash accounting” and “accrual accounting” in terms of conceptual and empirical, comparative, right next to the main similarities and differences between them, and the usefulness of accounting information produced by them in the decision-making process by users of accounting information. The use of one or the other accounting model makes the accounting information different, respectively creating a different picture of financial performance, the parties concerned, in many cases, to request additional information. It is therefore of interest to be known options regarding the production of accounting information, indicators for measuring the financial performance of the entity.
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A big part of the decisions regarding the economic entity are grounded on the basis of the accounting information regarding the added value, the performance. The added value of an economic entity will always be studied globally, both financial as well as non-financial. In the context of sustainable development, the added value should be recognized not only in a static but also a dynamic vision, at least in three dimensions: economic, social and environmental.

Traditional indicators by which the added value is measured are of a financial nature, which have as their source the profit and the cash. The importance of profits and cash is recognized in ensuring the survival of an economic entity, the sustainable development at a global and organizational level. Therefore, profit and cash represent the two dimensions for defining the financial performance. Around them, have drawn the architecture of the two accounting models: model of accrual accounting and cash accounting.

The two accounting models have been the subject of debates in the literature, where it presents conceptual elements and thereof, it can be identified and highlighted features similarities, and differences (Englund, Gerdin & Abrahamsson, 2013).

Some have presented the concepts and methods used by financial accounting which included deepening the introduction or theoretical knowledge of the two accounting models. Others have studied the advantages and disadvantages of the two accounting models used in accounting information relating to the economic entity’s activity, as well as its result. The work of synthesis based on the models of accounting has been the subject of study for some scholars or professionals, accountants that led to the presentation of the result in the form of cash flow or profit/loss. In this respect, it should be mentioned the authors of Weil, Schipper, and Francis (Weil et. all, 2014; Ristea et all, 2010; Tickell, 2010; Cantu, 2012; Zarandi et all, 2013; Mulford & Comiskey, 2005) as well as legislation that represents the current state of knowledge concerning the two models.

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