Balance Theories

Abstract

Balance, as a tool for modeling and presentation of heritage, is known and used for centuries, but a thorough study is conducted by researchers until the end of the last century. A crucial role in deepening the scale of balance sheet information, and developing theories on the stock returns has the German school of accounting. Here are different theories on balance put forward by various authors on: 1. defining the concept of balance, 2. purpose and content of economic balance, 3. how are items assessed in the balance, 4. the presentation and ordering data, and 5. possibilities for increasing the quality of information derived from the balance sheet. Appeared in foreign literature or in Romanian literature, these theories have in common the fact that they are designed and based on the dual representation of heritage through the balance sheet.

Headnote

Key words: balance, balance sheet information

Abstract:

Balance, as a tool for modeling and presentation of heritage, is known and used for centuries, but a thorough study is conducted by researchers until the end of the last century.

A crucial role in deepening the scale of balance sheet information, and developing theories on the stock returns has the German school of accounting.

Here are different theories on balance put forward by various authors on:

* defining the concept of balance;

* purpose and content of economic balance;

* how are items assessed in the balance;

* the presentation and ordering data;

* possibilities for increasing the quality of information derived from the balance sheet.

Appeared in foreign literature or in Romanian literature, these theories have in common the fact that they are designed and based on the dual representation of heritage through the balance sheet.

Theories on the balance in foreign literature

The foreign literature of the 20-th century has put into light many theories about the balance sheet, such as static theory, the theory of dynamic, organic theory, the theory, theory of balance-gold nationalist theory, theory eudynamic, the balance theory, the pagatone theory, balance forecasting theory, analytic function theory of the balance sheet, the theory of balance multiple goals, estimate theory, balance theory synthetic theory calculation yields, balance theory of financial-economic, etc..

Static theory is part of the theories tier. After some authors, this theory was developed by H. Nicklish, and the other authors of Walter le Coutre.

Balance sheet purposes, according to this theory, are to present tools and resources that make up the heritage at a time.

With all that in the balance sheet is shown as position and overall financial results, it is found only as a source of funding, if favorable, and the actively circulating in the settlement, if it is unfavorable.

Items property assessment is made on the purchase price (or cost of production, as appropriate), which ensures comparability over time the balance sheets. In the static design, content and balance of the account "Profit and Loss" is required to be presented in a group objective, so that they show how it is equipped to achieve the goal.

Dynamic theory was developed by E. Schmalenbach the year 1916, article "Theorie der Erfolgsbilanz" and published in 1919 in "Grundlagen dynamischer Bilanzlehre".

Conceiving the dynamic balance has the purpose to determine financial results after a period of management. Results are calculated and presented in the balance sheet through a comparison of costs and revenues. According to this theory, asset and liability values represent transitional processes partly completed, the next period will turn into expenses, payments, receipts and income.

Results are analyzed and designed as a tool of economic calculation, which describes the internal transformer and processes generating financial result. And balance between the "Profit and loss" there is a correlation which shows the flow costs (which represents or will represent payments) and results in the form of profits and credit, income and loss.

Assessment of balance sheet items must be made at constant prices, so that it can be ensured comparability of results over time, and on this basis to assess the effectiveness of economic activity in the current period.

Therefore, the concept of dynamic balance is presented as a theory of evaluation that aims to make a profit comparable.

Organic theory was founded by Professor Fritz Schmidt to work, "Die organische Tageswerthbilanz "released in 1921. The author considers that, "the balance has two equally important objectives: first, calculating and presenting the characteristic of the two sides, means the source of the heritage and, on the other hand, calculation and presentation of the financial outcome".

According to this theory, the relations established with the incorporation of organic substance, "or assets of each entity in the national economy", for which this theory is called "organic". As a result, the assets have not only changes as a result of their work, but also because of changes short.

Assessing the economic balance sheet items must be made taking into account the market value of the goods and not their cost of acquisition. According to the organic conception of the balance sheet, not winning entrepreneur is viewed as a difference between selling price and cost of goods, but as a difference between the price of replenishment of the day sale and selling price. The theory, founded by W. in his Osbahr, "Standpunckt Die Bilanz von der Unternehmung "released in 1918, shows the balance as a means to achieve economic goals resulting from the existence of an enterprise.

According to this theory, the balance is for the management information concerning real property. As for rights and obligations they are meant to third parties. In this way, the balance becomes the main instrument for achieving economic goals of the enterprise.

H. Nicklish reprints the work of W. Osbahr in 1920 and considers the theory so valuable that renounces his own theory on static theory.

In Gold-balance theory professor E. Schmalenbach (,,Goldmarkbilanz", Leipzig, 1922) is showing that due to currency depreciation, the balance sheets prepared in national currency, no longer reflect reality, and therefore proposes to end balances in the two values, namely currency paper and coingold.

In developing such a kind of balance one must reassess the property elements of the report and the current gold standard, which ensures comparability with previous periods.

The nominalist (realistic) theory was developed by Wilhelm Rieger and presented in the paper entitled, "Einführung in die Privatwirtchaftslehre" (Nuremberg, 1928). The author believes that "a definitive review of all elements of property may be completed only in liquidation, dissolution or sale of the company, because only then there is a "full settlement" in size and effective money expression ".

"The result is determined by comparing the asset converted into cash due to liability (payable)".

In other cases, the annual accounts drawn up during the operation not only provides, "interim settlement" which is useful only for control purposes but all balance sheets completed during the year, according to this theory, are regarded as illusory.

The eudynamic theory based on the H. Sommerfeld, "Eudynamische Bilanzlehre" and published in 1936 in Berlin, is formed on the basis of a compromise between the dynamic and organic theory.

According to this theory, the function of the balance sheet is to provide information on real relationships and increase conservation heritage, which must provide a fair lying of the economic and financial results.

Achieving both content and function, the drawing up of the balance sheet will take into account the following principles:

a) must be reported in the balance sheet only benefit actually realized, i.e. that the form of money, but losses are indicated whether they were achieved or not;

b) applying the maximum price of prudence in the assessment of heritage items, namely that a certain price, obtainable at anytime.

Conceiving eudynamics, "secure price" means the price you can get the date for the balance after you have considered all possible risks, regardless of their nature.

Constructing eudynamics theory is centered on the principle, maximum prudence."

Theory balance in full (total), designed by Walter Ie Coutre ("Totals Bilanz", Stuttgart, 1956) is a development of the static theory that the author transforms from a theory into a dualistic tier.

In the opinion of Walter le Coutre, the balance performs a dual role: the reflection of assets and management of the business. According to this theory, "balance is an auxiliary means of technical illustrating, on the one hand, the relations with third persons and entrepreneurs in the capital brought about by them and, on the other hand, capital assets purchased and put into operation". Moreover, the balance is considered, the calculation of synthesis which allows thorough knowledge of heritage and on this basis builds and develops those decisions to ensure optimization of business enterprise.

The pagatoric theory developed by Erich Kosiol and presented in the paper, "Pagatorische Bilanz" released in 1956 in Stuttgart, is based on dynamic theory of E. Schmalenbach and economicfinancial balance sheet theory of E. WaIb. The author proposes in this theory "an original way to determine the balance year (profit or loss), namely, by offsetting payments with receipts, resulting in cash".

According to the theory, in the receipts must be included not only the actual income, but also those arising from claims or settlements that are due. A similar approach of matching payments and where the actual payment shall have be regarded as the obligations which are due or settlements. Due to the way in which original results are determined, the pagatoric theory is operating with several types of balance:

* pagatoric balance movements (turnover receipts and payments);

* balance of balances pagatoric (present results of the balance structures as follows: by transfer receipts and payments by bank transfer, cash receipts and cash payments, expenses and anticipated income, etc.).

* balance sheet accounts of expenditure and revenue, which serves to determine the financial outcome.

The balance forecast theory (perspectives), founded by W. Engels in 1962, shows that the balance is forecast on a theoretical guidance. The opinion of the author, the main purpose is to balance "to determine the perspective, which involves a detailed analysis in order to identify and eliminate subjective influences that have taken place and orientation in an appropriate manner the work ahead.

Analytic function theory of the balance sheet was prepared by Wolfgang Stützel in 1967. This theory aims to solve problems related to balance-sheet assessment that determine the real value of the enterprise so that profits to express high precision quality work done at the enterprise level. The solution we propose law, denying the traditional concept, that, balance is a means of measuring wealth and result in an exchange acceptance, theory of measure.

Theory of balance multiple goals proposed by professor E. Heinen from Germany, "put in 1969, the bases the concept of balance and design to serve multiple purposes in the management and fiscal relations with third parties: information, analysis, control, decision, etc".

In this sense, to remove the drawbacks caused by the static balance, the author proposes supplementing it with a large annex called, "stock movements". Thus, the balance completed by additional data will be able to meet a large number of purposes, and notes on the balance sheet can be continuously improved.

Estimate theory, developed by K. Käfer and published in the work, "Die Bilanz als Zukunftrechnung "in Zurich in 1962, is based on the nominalist theory of W. Reiger.

According to this theory, the balance is submitted as, computers perspective "designed to provide information necessary for decision-making activities of the future. However, the Käfer's theory remains essentially a static theory of development, in which balance is seen as a report on inputs of goods, services and receipts (submitted) and the output of goods and services payments (shown in passive), forecasted to take place in a future period.

Balance sheet synthetic theory based in Horst Albach in 1965, believes that balance is, the goals are known, the role of instrument of planned settlement payments and profit plan which is compared with actual achievements of the balance-sheet.

In the opinion of the author, is considered to be a balance, the account summary through which the enterprise is reflected as a whole. At the same time, it is seen as a tool for management and control activities, including the future.

Theoretical yield calculation developed by MR Lehmann falls into the category of modern theories on the balance sheet. The theory was considered to be enforceable against a materialistic theory of formal theories (theory of static and dynamic theory).

In substantiation of his theory, Lehmann takes over from its predecessors, E. Schmalenbach (dynamic balance) comparability data, and particularly those concerning profitability, from F. Schmidt (organic stock) valuation at the price the day, and from E. WaIb (economic-financial balance sheets) in assessing the capital value of procurement, taking into account monetary and oscillations.

Theory of financial economic balance, developed by Ernst WaIb in 1966, is a development of the dynamic balance theory. This theory gives much more balance, that is the main instrument of control and design decisions.

In the opinion of E. Walb, "existing capital" constitutes an essential element of the enterprise, while, the balance is seen as a tool for monitoring and provision of this capital.

Financial-economic theory that considers both the balance and account, "Profit and loss" are models that fulfill distinct functions in heritage management.

Therefore, the balance reflects the balance of financial flows over the payments (house, debtors, obligations, own sources, etc.), and the profits and losses reflect the actual balance flows (material) taken from the production (goods, assets, salaries, etc.)

Theories on the balance in the scientific literature in our country

To the efforts of authors from abroad to improve on the theoretical foundations of accounting and balance sheet of default have also been aligned the Romanian authors.

Although in terms of numbers they are inferior, through design, creating values, a talent power and penetration to discern the secrets of accounting are equal to those foreigners.

In the area of balance, Romanian historiography certifies intense concern since the first decades of the twentieth century.

In a retrospective analysis of theories balance in our country it is found that they differ, mainly in relation to the categories used for the basis assets and liabilities as a qualitative determination of the balance sheet.

In the literature of our country are given the following theories:

* economic theory,

* economic theory,

* balance theory and reality

* multiple balance theory.

Economic theory was developed by teachers and Alexandru Spiridon lacobescu Sorescu, which propose explaining assets and liabilities of the economic category of heritage.

According to this theory, assets include objects of rights and obligations of objects, i.e. economic realities and economic assets and liabilities shows the rights and obligations, i.e. equity and creditors (liabilities). Following breeding heritage assets include the final results in the form of loss and liability, the final results in the form of benefits

.In terms of goals assigned balance sheet, design Romanian authors fall in static theory.

Economic theory, founded by I. Evian in the paper "double accounting" (Bucharest, 1946) presents both sides of balance sheet assets and liabilities, using the category of means of economic enterprise.

Seen through the economic theory, the balance is seen as active, as an expression of the assets, and liabilities, as an expression of its capital.

Therefore, assets and capital are two sides of the same categories namely, the means which is equipped with the business.

Importance it attaches to the economic balance sheet for the understanding of accounting resulting from the following claim: "who wants to learn and apply rational and solid double accounting must cease to think of more legal, but only economic - to think from the beginning until balances in the end."

By way of assessing the elements of assets and capital, and the use of accounts and amending delimitative, this review contains elements of organic and dynamic theory.

Reality balance theory was developed by professor Dumitru Rusu doctor docent. In the author's vision, balance, "is a tool that allows notification of a single position on economic and legal and financial undertaking and that shows in detail the nature of its action, and foreign resources, including the final outcome."

According to this theory, the reality of balance requires that all the problems and phenomena to be seen in full, whether they are of a socio-economic or legal nature.

Therefore, the balance sheet is presented, in particular quantitative and qualitative indices.

Professor Dumitru Rusu sees the reality of the balance sheet as expenditures subject to locate the economic circuit stages, the lack finish and evaluation of production methods used in the analysis of expenditure for the accuracy of inventory operations. Data presented in the balance sheet should reflect the economic situation of the company as it in reality.

Through the presentation and background theory to reality balance remains in our opinion, as a theory anchored in the reality of strong economic and financial enterprise, which allows the investigator to form an accurate picture of it.

Theory balance multiple substantiated by Professor M. Ristea and exposed in the work, "Management of the balance "(1989), based on the dual representation of assets, where the balance is designed and used as a model global and structural, a model of state and motion, a model based on economic calculation and inter-manager, a static model and dynamic model.

Regarded as a global model and the structural balance, it is intended to provide a summary description of the assets and characteristics as a whole to those of its parts, and a morphological representation, from components to a global vision.

Examined as a model of state and motion, the balance has the capability to order, and ranked this high accuracy with many time-space relationships that occur as a result of the breeding heritage. The analysis shows that the balance sheet as a model calculation based on economic manager should have shown correlations between assets and liabilities, expenses and results, so as to reflect efforts made directly from a single patrimony.

Meanwhile, the balance must be open and the calculation inter-manager to this, and efforts that you make the allocation of funds through separate real and the effects achieved by saving resources and reducing time limits for restraint from the moment of graduation until the reproduction.

By its very construction, the balance is a model that reflects the static information relating to the management to keep it. However, its state is being highlighted and that he structures the relations of balance, given the use of mathematical tools which are based or relational matrix calculation. However, the balance may become a dynamic model, where sizes are representative split up management.

Professor M. Ristea indicate that a single model balance is unable to meet all users' needs and propose, that the design and balance as a network model able to characterize the whole process of breeding heritage.

Such a network must necessarily include the model to describe the assets in its entirety and structuralism and other derivatives and models converging that may be applied to the calculation and representation, financial results and distribution of benefits, costs and income, status and movement assets, liabilities and movement condition, the economic investment to the extent that in financial terms shall constitute a distinct heritage in breeding.

Theories balance is still important sources of inspiration for various researchers in addressing complex issues related to construction, analysis and control of assets based on the balance sheet.

Finally concludes that balance theories, whether or dualist tier, is essential in theoretical research and practices, as show ways and techniques of representation heritage.

References

Bibliography

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Dumitrescu, St., Toma, D. 1973. Principii ale contabilitatii (Accountancy priciples). Bucuresti: Ed. Didactica si Pedagogica

Petris, R. 1988. Contabilitate generala, vol I si II (General accounting , vol I and II). lasi: Ed. Universitatii "Al. I. Cuza"

Richard, J. 1993. Analyse financiere et audit des performance. 2e edition. Paris: La Villeguerrin Editions

Toma, C. 2001. Conturile anuale si imaginea fidela in contabilitatea romaneasca(The annual accounts and the true picture within the romanaian accounting). lasi: Ed. Junimea

Tudose, A. S. 1999. Bilantul contabil in sistemul informational al intreprinderii (The accounting balance sheet within the informational system of the enterprise). Bacau: Ed. Moldavia