(PDF) Accounting Theory and Practice: the Ethical Dimension

[Date]
Accounting theory
Accounting theory and
practice

Contents
Introduction............................................................................................................. 3
Capital Markets and Accounting..................................................................................3
Emergence of capital market.......................................................................................... 3
Need for statutory bodies in capital market.........................................................................4
Changes in the accounting standards for the capital market.....................................................5
Benefits to capital market if complying with the accounting standards.......................................6
Enforcement to apply accounting standards to the capital market.............................................7
Transparency through accounting standards attract investors...................................................7
Conclusion............................................................................................................... 8
References................................................................................................................ 9

Introduction
With the increasing integration of the economies, it is quite visible that capital market has
been extended because of advanced technology and assistance from government. The global
economy views that increasing trend of FDI (foreign direct investment) and FII (Foreign
institutional investments), financial and accountancy reporting will change to check whether
each transaction has been recorded and also the check it is not harming the national economy.
The report brings out a discussion on capital market and accounting. The report discussion
shows the relationship between capital markets and accounting (Hasibuan, and Syahrial,
2019).
This will include studies of market reaction on the newly launched accounting standards and
policies, which brings out capital gain tax imposed on capital tax. It is important to know that
there is a long-term association between newly accounting rules and stock returns. The core
objective of this report is to assess whether research conducted under policies of accounting
evaluation, which is useful in availing data to the investors. Capital market is the part of
financial market. Furthermore, the report discusses the issues and progress confronted after
implementing the accounting reporting needs, feasible course of actions to gain global
harmonisation, and interactions between international capital markets and accounting policies
(Jermias, 2017).
Capital Markets and Accounting
Emergence of capital market
It has been seen that with the emergence of multinational markets, the requirements of every
business has increased and one person is able to hold and invest a capital of more than 5
million alone. A person necessarily needs assistance from others while establishing the
business. Therefore, the total capital was divided into shares and each individual asked for

favour in the organisation as far as the earnings are concerned (Hasibuan, and Syahrial,
2019). Total capital structure was not limited to power and holding distribution among the
shareholders but according to the experts of financial markets, each company should maintain
a particular amount of debt to reduce the empowering decision of shareholders on every
agreement of organisation. This concept gave a commencement of capital market (Nordin,
and Nordin, 2016).
Need for statutory bodies in capital market
Furthermore, in order to keep a check on capital markets and operations, the government has
authorised body such as SEBI in India and Australian Stock Exchange (ASX) in Australia.
This limited was formed in 1987 and enacted by the Australian Parliament. The functions of
ASX include overseeing of compliance related to operating rules and the promotion of
corporate governance for the Australian listed companies and it tries to educate the investors
and protect them from external frauds in the capital markets. The international customer base
of ASX is quite diverse, which includes corporations, trusts, hedge funds, trading banks,
investment banks, and brokers (Aggarwal, 2017).
Financial market refers to market consequences in which financial markets such as
debentures, bonds, shares, assets, derivatives, and trading. It is quite important in allocating
limited resources. Different types of financial market cover stock market, bond market,
derivative market, determination of price of securities, and creating liquid financial assets
(Qiu, Ma, and Xu, 2018).
Capital market is a financial market, which includes selling of long-term debt and equity
securities. It is seen that private companies often avail browser platforms, which will allow
people to trade shares. For the last years, it is seen that there has been a tremendous changes
in capital market. It helps in channelizing surplus money from the savers to the institutions,
which the company will invest in productive. This act leads to generation of profits and