Assignment

On
Social Accounting

Course Code: ACC- 245

Course Tittle: Intermediate Accounting

Prepared for:
Mr. Iehit Sharma
Senior Lecturer
Department of Business Administration
Leading University, Surma tower, Sylhet. Bangladesh

Prepared by:
No
.
01
02
03

Name

ID

Ahmed Al Masud

1201010389

Date of Submission: 19 December, 2015

1. Introduction
Social accounting takes a wide variety of forms and appears under various labels. 'Social
accounting' is used here as a generic term for convenience to cover all forms of 'accounts which
go beyond the economic' and for all the different labels under which it appears social
responsibility accounting, social audits, corporate social reporting, employee and employment
reporting, stakeholder dialogue reporting as well as environmental accounting and reporting.
Some explorations of themes which comprise social accounting are considered later.
Social accounting has always struggled to find its place in the accounting firmament. It continues
to do so. Social accounting neither an established part of corporate and/or accounting neither
practice nor is it enthusiastically adopted or admired by any of the different branches of the
alternative/critical project. Thus it is neither a part of 'conventional accounting' nor an obvious
part of the research literature in which that accounting is addressed, analyzed and critiqued.
Whilst different parts of social accounting seek to resonate with elements of either conventional
accounting as currently conceived or with streams of argument within the alternative/critical
project, the heart of the social accounting project tries to create and occupy a new disciplinary
space which seeks some manifestation of what an 'alternative/critical' accounting might look like
whilst heavily tempered by recognition of reporting practicalities and realpolitik. We might, for
the purposes of this discussion, typify the social accounting project as one which seeks change in
the form of new accountings, a project which (ideally, at least) is deeply sympathetic to (and
increasingly influenced by) the different streams of the alternative/critical project but a project
which 'gets its hands dirty' and is, consequently, partially mired in the impurities of pragmatism.
For these (and, indeed, other reasons which we shall touch upon in due course) social accounting
has consistently attracted a small but substantive array of criticisms - even attacks: social
accounting is "not accounting"; it is inappropriate for accountants; it is managerial list; it disrupts
capital markets; it is trivial and/or irrelevant; it is ethnocentric; it is anthropocentric; it is
phallocentric; it is under-theorized; it threatens profitability; and so on. Not surprisingly,
therefore, the social accounting 'project' is probably rather more self-conscious than most areas
of accounting research. Such self-consciousness seems inevitable as we struggle to tell stories
that make sense of social accounting, respond to critique from all branches of accounting and
finance and to seek an articulation that justifies its study and practice in the shifting sands of
collegiate disdain, abuse and (perhaps worst) indifference. This sense of the project being
unloved and beleaguered is, at times, so overwhelming that it is difficult to know whether the
project (in a somewhat trite, perhaps, 'ideal type' Kuhnian world) should be abandoned altogether
as it is so unacceptable to such a large proportion of the academy. Or is it, perhaps, that attacks
from all sides actually tell us that social accounting is doing something so unpopular that it must
be of value and, with the ineffable optimism of the social accounting project, we should call for
much wider participation in a project which speaks of the possibilities of a resilient new
accounting - albeit one as yet unformed.

2. What is Social Accounting?

Social accounting is about understands the impact of organizations on our society and the
overarching context is sustainability: both sustainability of the organization itself (the
interrelation of the social, the environmental, the cultural and the financial) and sustainability of
behavior which contributes to a future for the people and the planet. Social accounting is distinct
from evaluation in that it is an internally generated process whereby the organization itself
shapes the social accounting process according to its stated objectives. In particular it aims to
involve all stakeholders in the process. It measures social and environmental performance in
order to achieve improvement as well as to report accurately on what has been done.
Social accounting gains more meaning the longer you do it. Over time you will have a record of
how your community organization or enterprise has progressed and changed, and the sorts of
impacts you have had. Social accounting is therefore a useful means of documenting your
achievements and building a historical record of the organization or enterprise for members (and
any paid workers). Social accounting can be used when reporting to funders on the outcomes of
projects and initiatives. But it is important not to lose sight of the primary purpose of social
accounting as a means for community organizations and enterprises to track for them how they
are going.

Social accounting is a process that enables an organization to assess, report, and improve on its
social, economic, community and environmental strengths and limitations rather than its
financial ones. The aim being to gather each stakeholder groups views and perspectives on what
they consider to be the significant indicators as to how well, or not, the organization is achieving
its aims and objectives.

3. History of Social Accounting

Modern forms of social accounting first produced widespread interest in the 1970s. Its concepts
received serious consideration from professional and academic accounting bodies, e.g. the
Accounting Standards Board's predecessor, the American Accounting Association and the
American Institute of Certified Public Accountants. Business-representative bodies, e.g. the
Confederation of British Industry, likewise approached the issue.
In 1981 Freer Spreckley produced a short book entitled Social Audit - A Management Tool for
Co-operative Working designed as an internal organizational social accounting and audit model

specifically for social enterprises who wished to measure their social, environmental and
financial performance. This was the basis for the Co-operative Bank and Shell Corporation's
social performance reports in the UK and subsequently many other private sector companies
social responsibility reporting.
In the 1970s Abt Associates conducted a series of social audits incorporated into its annual
reports. The social concerns addressed included "productivity, contribution to knowledge,
employment security, fairness of employment opportunities, health, education and selfdevelopment, physical security, transportation, recreation, and environment". The social audits
expressed Abt Associates performance in these areas in financial terms and thus aspired to
determine the company's net social impact in balance sheet form. Other examples of early
applications include Laventhol and Horwath, then a reputable accounting firm, and the First
National Bank of Minneapolis (now U.S. Bancorp).
Yet social accounting practices were only rarely codified in legislation; notable exceptions
include the French bilan social and the British 2006 Companies Act. Interest in social
accounting cooled off in the 1980s and was only resurrected in the mid-1990s, partly nurtured by
growing ecological and environmental awareness.
The giving and receiving of accounts seems to be an inherent part of human experience. For the
bulk of human experience these accounts will be essentially social and either formal or informal
in nature. However, as the world and its organization becomes more complex, we find the formal
accounts - and, especially, formal economic accounts - rising in importance to the point where
they are the ubiquitous and powerful phenomena that exercises us as accounting academics.
Thus, although the giving and receiving of 'social accounts' is probably as old as human society,
it has fallen to other disciplinary tribes to examine and explore these accounts and only latterly
have accounting researchers turned their attention to such matters. Whether properly or not, (selfstyled) social accounting research has largely ignored this broader giving and receiving of
accounts and largely concentrated (in common with so much of accounting research) on those
accounts in which the organization as opposed to the individual, family, group - features as the
entity to which the account relates.
More particularly, social accounting is typically thought of as an activity (and a possibility) of
emerging interest from about the mid- to late-1960s. Recognition of and interest in the subject
grew, contemporaneously, with an apparent growth in anxiety about corporate ethics, corporate
power, social responsibility and ecological degradation. These phenomena, in turn, were to be
understood against a backdrop of a significant radical ferment that seems unimaginable at the
millennium. This was a time when, depending on your point of view, (for example), capitalism
was fighting a rearguard action for its legitimacy, a new social contract between business and
society was being forged or the essential contradictions of capitalism were about to produce the
predicted collapse.

The brave new world that the 1960s promised also laid the foundations that, as the decade led
into the 1970s, produced an explosion of explorations into managerial and corporate social
responsibility. This brought with it an attendant new vocabulary of social audit, social
performance, social disclosure and accountability. With it also came an increase in both
experimental practices of social audits, increased attention to metrics of measurement for "social
performance" and a steady growth in both journals and papers in those journals concerned with a
whole raft of matters whose central concern was to (re-)conceptualize the notion(s) of 'business
and society'. (Accounting, Organizations and Society in 1976 was clearly amongst this number).
Of significance, the period up to the late 1970s also laid the foundations for a seemingly
unprecedented increase in new laws requiring, inter alia, disclosure about aspects of the
organization's social, labor and environmental intentions and performance.
Closer to home - and for reasons that are still not entirely obvious - the accounting profession
was, by the mid-1970s - taking surprisingly positive attitudes, positions, even steps about these
developments. The UK Accounting Standards Steering Committee (as was) had produced, what
remains, the most radical re-statement, from the accounting profession, of how organizational
disclosure needed to be enhanced by social and environmental accounting. At the same time, the
US profession was actively commissioning and publishing texts supportive of social accounting
The 1970s also saw the emergence of the value added statement and it was the zenith of both
interest in and practice of employee and employment reporting. This interest was reflected in the
professional accountancy journals which were demonstrating a quite remarkable appetite (by the
standards of the 1990s) for polemic and experimental writing on social accounting.

4. Purpose of Social Accounting:

Each sector and each particular organization will have its own reasons for looking to account for
their social performance. Some reasons reported by organizations include the following; acting
sustainably, walking their talk, improving social and environmental performance, being more
accountable, attracting additional funds, becoming more economically viable, being a leader in
the field, attracting a wider market, a public relations tool, meeting objectives, working within a
framework and improving reporting ability. An additional factor that applies to the for profit
sector is that of mandatory social reporting. In some countries social reporting is a legal
requirement. For instance, in France companies with over 300 employees are required to produce
a social report. In the UK a regulation on Pension Funds requires trustees to state the extent to
which they have taken environmental and ethical considerations into account in fund
management (New Economics Foundation 2000). There are initial signs in Australia that
mandatory requirements may also drive greater social accounting and reporting here. The
Financial Services Reform Act 2001 requires a Product Disclosure Statement (PDS) for financial
products that have an investment component. This includes superannuation products, managed
investment products and life insurance products. The PDS has to include a statement on the

extent to which labor standards or environmental, social or ethical considerations are taken into
account in the selection, retention or realization of the investment.
Social accounting challenges conventional accounting, in particular financial accounting, for
giving a narrow image of the interaction between society and organizations, and thus artificially
constraining the subject of accounting.
Social accounting, a largely normative concept, seeks to broaden the scope of accounting in the
sense that it should:

concern itself with more than only economic events;

not be exclusively expressed in financial terms;
be accountable to a broader group of stakeholders;
Broaden its purpose beyond reporting financial success.

It points to the fact that companies influence their external environment ( sometimes positively
and many a times negatively) through their actions and should therefore account for these effects
as part of their standard accounting practices. Social accounting is in this sense closely related to
the economic concept of externality. Social accounting offers an alternative account of
significant economic entities. It has the "potential to expose the tension between pursuing
economic profit and the pursuit of social and environmental objectives". The purpose of social
accounting can be approached from two different angles, namely for management control
purposes or accountability purposes.

4.1 Accountability
Social accounting for accountability purposes is designed to support and facilitate the pursuit of
society's objectives. These objectives can be manifold but can typically be described in terms of
social and environmental desirability and sustainability. In order to make informed choices on
these objectives, the flow of information in society in general, and in accounting in particular,
needs to cater for democratic decision-making. In democratic systems, Gray argues, there must
then be flows of information in which those controlling the resources provide accounts to society
of their use of those resources: a system of corporate accountability.
Society is seen to profit from implementing a social and environmental approach to accounting
in a number of ways, e.g.:

Honoring stakeholders' rights of information;

Balancing corporate power with corporate responsibility;
Increasing transparency of corporate activity;
Identifying social and environmental costs of economic success.

4.2 Management control:

Social accounting for the purpose of management control is designed to support and facilitate the
achievement of an organization's own objectives. Because social accounting is concerned with
substantial self-reporting on a systemic level, individual reports are often referred to as social
audits. The first complete internal model for social accounting and audit, 1981, was designed for
social enterprises to help plan and measure their social, environmental and financial progress
towards achieving their planned objectives.
Organizations are seen to benefit from implementing social accounting practices in a number of
ways, e.g.:
Increased information for decision-making;

More accurate product or service costing;

Enhanced image management and Public Relations;
Identification of social responsibilities;
Identification of market development opportunities;
Maintaining legitimacy.

According to BITC the "process of reporting on responsible businesses performance to

stakeholders" (i.e. social accounting) helps integrate such practices into business practices, as
well as identifying future risks and opportunities.
The management control view thus focuses on the individual organization.
Critics of this approach point out that the benign nature of companies is assumed. Here,
responsibility, and accountability, is largely left in the hands of the organization concerned.

5. Objectives of Social Accounting

Main objectives of social accounting are to help society by providing different facilities by
enterprise and to record them. We can write them in following points
5.1 Effective utilization of natural resources
A main objective of making social accounting is to determine whether company is properly
utilizing their natural resources or not.
5.2 Help to employees
Company can help employees by providing the facility of education to children of employees,
providing transport free of cost and also providing good working environment conditions.

5.3 Help to society

Because companies' factories spread the pollution in natural society which is very harmful for
society . So, enterprise can help to society by planting the trees, establishing new parks near
factory area. and also opening new hospitals
5.4 Help to customers
In social accounting this the part of benefits given by company to society , if company provides
goods to customers at lower rate and with high quality .
5.5 Help to investors
Company can help to investors by providing transparent accounting information to investors.
Because of many objectives are related to safeguarding of natural resources so this accounting is
also known as social and Environmental Accounting, Corporate Social Reporting, Corporate
Social Responsibility Reporting, Non-Financial Reporting, Sustainability Accounting

6. Scope of Social Accounting

Social Accounting and Audit allows a co-operative or social enterprise to build on its existing
monitoring, documentation and reporting systems to develop a process whereby it can account
fully for its social, environmental and economic impacts, report on its performance and draw up
an action plan to improve on that performance. Through the social accounting and audit process
an organization can understand its impact on the surrounding community and on its beneficiaries
and build accountability by engaging with its key stakeholders. In this way it can prove its value
and improve its performance. Basically, social accounting involves clarifying what a cooperative or social enterprise does, what it is trying to achieve and who it is working with. Then,
on the basis of this, it collects quantitative and qualitative information and data which relates to
its overall objectives and underlying values. This usually lasts one year and runs concurrent with
the financial year. At the end of the social accounting year the organization brings all the
information together in the form of social accounts that are independently audited and after
revisions the social accounts form a Social Report.
6.1 Formal accountability
In social accounting the focus tends to be on larger organizations such as multinational
corporations (MNCs), and their visible, external accounts rather than informally produced
accounts or accounts for internal use. The need for formality in making MNCs accountability is
given by the spatial, financial and cultural distance of these organizations to those who are
affecting and affected by it.
Social accounting also questions the reduction of all meaningful information to financial form.
Financial data is seen as only one element of the accounting language.

6.2 Self-reporting and third party audits

In most countries, existing legislation only regulates a fraction of accounting for socially relevant
corporate activity. In consequence, most available social, environmental and sustainability
reports are produced voluntarily by organizations and in that sense often resemble financial
statements. While companies' efforts in this regard are usually commended, there seems to be a
tension between voluntary reporting and accountability, for companies are likely to produce
reports favoring their interests.
The re-arrangement of social and environmental data companies already produce as part of their
normal reporting practice into an independent social audit is called a silent or shadow account.
An alternative phenomenon is the creation of external social audits by groups or individuals
independent of the accountable organization and typically without its encouragement. External
social audits thus also attempt to blur the boundaries between organizations and society and to
establish social accounting as a fluid two-way communication process. Companies are sought to
be held accountable regardless of their approval.[13]:10 It is in this sense that external audits part
with attempts to establish social accounting as an intrinsic feature of organizational behavior.
The reports of Social Audit Ltd in the 1970s on e.g. Tube Investments, Avon Rubber and Coalite
and Chemical, laid the foundations for much of the later work on social audits.
6.3 Reporting areas
Unlike in financial accounting, the matter of interest is by definition less clear-cut in social
accounting; this is due to an aspired all-encompassing approach to corporate activity. It is
generally agreed that social accounting will cover an organizations relationship with the natural
environment, its employees, and ethical issues concentrating upon consumers and products, as
well as local and international communities. Other issues include corporate action on questions
of ethnicity and gender.
6.4 Audience
Social accounting supersedes the traditional audit audience, which is mainly composed of a
company's shareholders and the financial community, by providing information to all of the
organizations stakeholders. A stakeholder of an organization is anyone who can influence or is
influenced by the organization. This often includes, but is not limited to, suppliers of inputs,
employees and trade unions, consumers, members of local communities, society at large and
governments.[15] Different stakeholders have different rights of information. These rights can be
stipulated by law, but also by non-legal codes, corporate values, mission statements and moral
rights. The rights of information are thus determined by "society, the organization and its
stakeholders".

7. Applications of Social Accounting

Social accounting is a widespread practice in a number of large organizations in the United
Kingdom. Royal Dutch Shell, BP, British Telecom, The Co-operative Bank, The Body Shop, and
United Utilities all publish independently audited social and sustainability accounts. In many
instances the reports are produced in (partial or full) compliance with the sustainability reporting
guidelines set by the Global Reporting Initiative (GRI) and indexes including Ethical Quote
(CEQ) (reputation tracking of the worlds largest companies on Environmental, Social,
Governance (ESG), Corporate Social Responsibility, ethics and sustainability).
Tradecraft plc. The fair trade organization claims to be the first public limited company to
publish audited social accounts in the UK, starting in 1993.

8. Areas of social accounting

Companies and other organizations (such as NGOs) may publish annual corporate responsibility
reports, in print or online. The reporting format can also include summary or overview
documents for certain stakeholders, a corporate responsibility or sustainability section on its
corporate website, or integrate social accounting into its annual report and accounts.
Companies may seek to adopt a social accounting format that is audience specific and
appropriate. For example, H&M, asks stakeholders how they would like to receive reports on its
website; Vodafone publishes separate reports for 11 of its operating companies as well as
publishing an internal report in 2005; Weyerhaeuser produced a tabloid-size, four-page minireport in addition to its full sustainability report

9. Benefits of social accounting

9.1 Providing a powerful argument for the inclusion and involvement of an organization in
the formulation and delivery of regeneration policies. This is especially valid in the case
of the voluntary and service delivery sectors.
9.2 Direct stakeholder participation allowing for policies, which are representative and
effectively reflect the aims and values of the organization.
9.3 Enhancing the democratic process by
a) Allowing all stakeholders to have their views heard and taken into account.
b) b) Allowing greater involvement of all stakeholders who are affected by the activities
of the organization.
c) c) Embracing openness and accountability
9.4 Provides a means of identifying and addressing issues that are often regarded as un
measurable, or as soft outcomes.

9.5 Provides a way of measuring value for money, additionally, cost effectiveness, social
impact, and social benefit of projects and activities. All of these are becoming of
increasing importance to potential funders.
9.6 The Department of Environment Sustainability Indicator uses the phrase empowerment
and participation. This is almost impossible to measure as it can mean many different
things to many different people. A social audit provides a way of reporting on these
outcomes.
9.7 Allows feedback to link in with what is currently happening within the organization,
thereby not focusing on past events.
9.8 Aids identification of target themes and priorities.
9.9 Helps to identify social objectives.
9.10
Aids short, medium, and long term planning.
9.11 Increases staff motivation by encouraging involvement in the development of company
policy and target setting.
9.12

By ensuring confidentiality is maintained, creates a culture that encourages honest

feedback.
9.13
Ensures the organization is kept in touch with needs and expectations of
stakeholders
9.14
Identifying capacity building needs. There are three stages of learning:
Unconsciously incompetent merrily working away, being totally wrong and being
totally unaware you are wrong. Consciously incompetent - knowing that what you are
doing is not quite right and recognizing that you need to do something to rectify the
situation. Consciously competent - knowing that what you are doing is the right way. Or,
having recognized that you are consciously incompetent, you have undertaken training.
9.15
Social accounting will provide you with an ongoing record of how your
organization or enterprise has developed and changed over time.
9.16
You will get feedback on how things are going from the range of people involved
in your organization or enterprise.
9.17
You will be able to identify the areas where things are working well and not so
welland you can use this information to help continue what you are doing well and
make improvements to change whats not working so well.
9.18
You will know how well you are achieving your aims and values.
9.19
You will have a record of what your organization or enterprise is doing and the
sorts of impacts it is havinginformation you can use when applying for grants and
funding, for reporting on grants, and for promoting what you do.

10 Limitations of Social Accounting

Social accounting can be quite labor intensive, especially the first time. If the
organization has not done basic strategic planning in some time, it can be difficult to
progress through the process rapidly.

Although engaging in a social accounting process can be seen as a commitment to

improvement, social accounting is not explicitly recognized by funders and lenders.
The social accounting process is not particularly useful for benchmarking, as the
questions asked and methods for finding the answers are left to each individual
organization to decide. However, there are some organizations that are investigating
reporting to a common framework.

11 Steps to Social Accounting

Getting ready: The organization learns how Social Accounting works, what resources it
requires, decides how the process will be managed; and makes an informed decision about
whether to go forward. Often, this is done in conjunction with an orientation or a taster session
in which representatives of the organization explore the process of social accounting.
Step 1 Planning: In the first stage of Social Accounting, the organization clarifies its mission,
objectives and activities as well as its underpinning values. It also analyses its stakeholders
through completing a stakeholder map. These exercises help the organization to make explicit
what it does, why and how it does it, and who it works with and whom it seeks to benefit.
Step 2 Accounting: In this phase, an organization decides the scope or focus of the social
accounts, especially if it will build a comprehensive picture over time. The organization then sets
up ways of collecting relevant information over a period of time to report on performance and
impact against its values and its objectives, encompassing both quantitative and qualitative. The
information is then brought together and analyzed.
Step 3 Reporting and auditing: The information that was collected, collated and analyzed in
Step 2 is brought together in a single document, which serves as a draft of the social accounts.
People from outside the organization (a Social Audit Panel) then review this document to check
that the report is based on information that has been properly gathered and interpreted. When the
Panel is satisfied with the report and its findings, the organization can make its report available to
the stakeholders and wider public in full or as a shorter summary.
Social Accounting and Audit is really about examining the social, environmental and economic
performance and impact of an organization. There are a variety of key terms which are included
in the glossary as part of the new, revised manual.

12 Conclusion
To summarize; social accounting and audit is a framework to help clarify an organizations

values and objectives, report on performance against their objectives, and demonstrate social,
environmental and economic outcomes/impacts, emphasizing stakeholder engagement.
To conclude we can say that social accounting is a tool showing the commitment of firm towards
the society The conclusion drawn is that social accounting is not a means of, nor an alternative
to, but rather a framework methodology into which impact assessment can fit. Incorporate world
social accounting has been one of the major stepping stones in improvement in corporate social
responsibility. The ultimate goal of social accounting is measurement and reporting resources,
costs and social benefits in the corporate world, genuine social accounting has been one of the
first major stepping stones in improvements in corporate social responsibility.
We may conclude that the social responsibility of accounting is to fulfill the function attributed to
it within the total social division of labor. The responsibility of accountants and corporate
managers tasked with preparing accounting.

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