Accounting Theory Analysis: Agency, Stewardship, and Liabilities

This report provides an overview of accounting theory, focusing on agency and stewardship theories and their practical applications. It begins with an introduction to these theories, explaining their significance in the context of accounting policies and financial reporting. The report then analyzes five journal articles (three on agency theory and two on stewardship theory), published from 2005 onwards. Each article analysis includes the research purpose, the relationship between the theory and the research, key findings, and implications for future research. The report also defines the concept of obligation and how it relates to liabilities in a business context, emphasizing their importance in financial statements. The analysis of these theories provides insights into how businesses can implement them to improve their management, control mechanisms, and governance structures.

Running head: ACCOUNTING THEORY
ACCOUNTING THEORY
Name of the Student
Name of the University
Author Note

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Table of Contents
Introduction................................................................................................................................2
Agency Theory...........................................................................................................................2
Journal Article 1.....................................................................................................................2
Journal Article 2.....................................................................................................................3
Journal Article 3.....................................................................................................................4
Stewardship Theory...................................................................................................................4
Journal Article 1.....................................................................................................................4
Journal Article 2.....................................................................................................................5
Meaning of Obligation...............................................................................................................6
Liability as Present Obligation...................................................................................................6
Conclusion..................................................................................................................................6
Reference and Bibliography.......................................................................................................8

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Introduction
Accounting theory is the logical reasoning in regards of the assumption taken by the
management related to their accounting policies (Bosse and Phillips 2016). These theories are
developed through analysis, observation and scanning of day-to-day accounting practices
carried by the entity. It assists the entity to carefully carry all their business transaction in
their financial report. The report state about the agency theory and steward theory which is
used by the entity to carry different operations (Cowgill 2014). The definition of obligation
and how it can impact upon an entity business is also been explained in later part of the
report. The analysis of both theories is been done with the help 5 Journal Article which show
the impact of those theories in different aspects of business.
Agency Theory
Journal Article 1
The paper published by Susan P. Shapiro states about the about the concept of agency
theory. As per the analysis of paper it came out that the paper shows about different aspects
of agency theory (Shapiro 2005). The investigation has been based upon the economics
paradigm of agency theory and also state how the above-mentioned theory can be applied
upon the political science and sociology. It also examines the agency relationship roles in
regards of different social organization.
The theory has been applied upon the paper as the whole paper is based upon the
agency theory and how it can impact in the organization operations. The paper state all the
details of agency theories from its origin to the present situation, it shows all the changes that
are implemented in the theory.
As per the paper it came out that the author has came out with the application of
agency theory in different aspects as Management, Political Science, Law and Sociological

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Perspective. It states how an entity can apply the agency theory above mentioned point and
able to fulfil the business requirement. It helps the entity to examine the control of corporate
governance and how the management can monitor the different roles played by board of
directors and also the strategies of the entity.
The paper can help the entity to develop a better understanding of the concept of
agency theory and how they can implement the same in their business organization. The
entity can get all the amount of information required by them related to the agency cost. The
future avenue that can be generated from the paper that it will help the researcher to evaluate
the agency concept in each sector very easily and effectively.
Journal Article 2
The second article is published by Allen N. Berger and Emilia Bonaccorsi di Patti
which states about the agency theory and its application in banking industry (Berger and Di
Patti 2006). It shows about the predication done by the corporate governance in regards of
agency cost.
The investigation based upon the application of agency concept in regard of banking
industry. It shows the new approach taking into consideration of the agency theory related to
profit efficiency and firm profit to examine best-practice carried by the firm in regard of their
business operation.
The theory helps the author about how the entity can increase its overall profit with
the application of the agency concepts. It also states about the measure which can be used to
measure the ownership structure in the test.
Author has found out the effect of using the agency theory in different aspects of the
business. As the author can find the performance of the theory by implementing the same
infirm profit maximization approach.

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The implication which can be carried in future is that it helps the individual to the
know-how the theory can be related to the profit maximization and also help them to gain an
edge over the competitors. The data that has been used in the paper is of US banking
industry, and that went consistent with the given theory, and the result which was emerged by
the test is economically and statistically significant.
Journal Article 3
The article published by Mohammad Namazi states about the role of agency theory in
regards of implementing its management’s control.
The purpose of the research was to know the role of Agency Theory related to the
implementation of control mechanisms (Namazi 2013). It also able to elaborate the same in
certain situations as control management is only based on output due to which the condition
can become uncertain or when agent purpose is solely based upon the agent’s action and
additional variables.
The finding that can be seen in the paper is that the author can demonstrate the use of
agency theory in regards of the entity management control as it helps the entity to have a
proper control mechanism in regards to its business activities. It also elaborates the agency
theory related to the different organizational, economical roles in regards to the framework
imposed by the management in their business operations.
Stewardship Theory
Journal Article 1
The paper published by Stijn Van Puyvelde and Marc Jegers states about the
Stewardship theory related to the non-profit organizations.
The purpose of the research is to elaborate on the agency theory in regards to
stewardship and stakeholder theory. It shows how a non-profit organization can implement

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the stewardship theory in their governance and management operations (Van Puyvelde et al.,
2012). The paper state the assumption that is taken by the entity related to the stewardship
theory in their operations.
The theory helps the author and another individual to know about how they
implement the same in their business activities and help the entity to carry their operations
smoothly. It helps the author to discuss the issue faced by the non-profit organization related
to the theory mentioned above.
It was able to find more detailed approach in regards to the implementation of
stewardship theory in case of non-profit organization. The paper able to find about the
stewardship perspective and how it able to influence the governance in the non-profit
organization. These will help the individual to establish the principle-agent theory in non-
profit organization.
The paper will help the individual to have knowledge in regards to the principle-
agency concept and state the aspects related to the stakeholder and stewardship theory in non-
profit organization.
Journal Article 2
The article published by Beata Glinkowska and Boguslaw Kaczmarek states the
classical and modern concept related to stewardship theory.
The purpose of this paper is to show the relationship of company performance and
“the level of supervisory board’s self-reliance (Glinkowska and Kaczmarek 2015). It shows that
if the board is independent than only the entity will have high quality management process.
The theory is related to the paper as the author is able to build a relationship between
the agency and stewardship theory. It stated all the aspects that can be consider in
stewardship theory regards of different organization.

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It came up with important aspects related to the agency and stewardship theory and
show how it can affect the overall decision of the entity corporate governance in their
operations. It states the financial factor is not the main motivator for the employee in the
business operations.
Meaning of Obligation
Obligation is the amount of future payment which an entity has to pay to its suppliers
and other individual. Sometimes due to some term of contract an obligation arises in the
business operation which the entity has to pay in certain time limit (Mitnick 2015). The
framework relies upon this definition as it states about the liability and how the entity can
consider an item to be a liability in their business operations.
Liability as Present Obligation
Liabilities are considered to be present obligation as the entity has to pay it in a
certain time period. Liability are considered to be legally enforceable claim as if the entity is
not able to pay the same than it may have to face legal issue in their business activities.
Sometime the liability has some legally enforceable claim but it is not necessary that the
liability also exist in the operation. The factor can be changed as per the event occurred in the
business.
Conclusion
On a final note, the report concludes about the accounting theory which is been used
by the entity in regards of their accounting policy. It states about how management prepare
their accounting policy with the help of accounting theory. The report discusses about the
agency theory and stewardship theory and shows how it can be implemented in different
organizations. The analysis is based upon 5 articles regarding both agency and stewardship
theory and help the entity to know about the implication of the theory in implementing the

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same in management operations. It also state about the definition of obligation and also why
the framework rely upon the definition while preparing the financial report.

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Reference and Bibliography
Berger, A.N. and Di Patti, E.B., 2006. Capital structure and firm performance: A new
approach to testing agency theory and an application to the banking industry. Journal of
Banking & Finance, 30(4), pp.1065-1102.
Bosse, D.A. and Phillips, R.A., 2016. Agency theory and bounded self-interest. Academy of
Management Review, 41(2), pp.276-297.
Cowgill, G.L., 2014. “Rationality” and contexts in agency theory. In Agency in
archaeology (pp. 67-76). Routledge.
Glinkowska, B. and Kaczmarek, B., 2015. Classical and modern concepts of corporate
governance (Stewardship Theory and Agency Theory). Management, 19(2), pp.84-92.
Madison, K., Holt, D.T., Kellermanns, F.W. and Ranft, A.L., 2016. Viewing family firm
behavior and governance through the lens of agency and stewardship theories. Family
Business Review, 29(1), pp.65-93.
Mitnick, B.M., 2015. Agency theory. Wiley encyclopedia of management, pp.1-6.
Namazi, M., 2013. Role of the agency theory in implementing managements control. Journal
of Accounting and taxation, 5(2), pp.38-47.
Pepper, A. and Gore, J., 2015. Behavioral agency theory: New foundations for theorizing
about executive compensation. Journal of management, 41(4), pp.1045-1068.
Rashid, A., 2015. Revisiting agency theory: Evidence of board independence and agency cost
from Bangladesh. Journal of Business Ethics, 130(1), pp.181-198.
Shapiro, S.P., 2005. Agency theory. Annu. Rev. Sociol., 31, pp.263-284.

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Shogren, K.A., Wehmeyer, M.L. and Palmer, S.B., 2017. Causal agency theory.
In Development of self-determination through the life-course (pp. 55-67). Springer,
Dordrecht.
Van Puyvelde, S., Caers, R., Du Bois, C. and Jegers, M., 2012. The governance of nonprofit
organizations: Integrating agency theory with stakeholder and stewardship
theories. Nonprofit and voluntary sector quarterly, 41(3), pp.431-451.