Ontology and accounting: The concept of profit

Abstract

Whenever accounting is discussed it involves dealing with concepts like revenue, cost, depreciation and profit. The question raised in this paper is in what sense do those phenomena that accounting concepts refer to actually exist. Therefore, the underlying assumptions about the existence of reality that are reflected in accounting concepts are discussed. The analysis concentrates on the ontological nature of the concept of profit in accounting. Traditionally, and even today, the general idea of objectivity dominates the thinking in both accounting theory and practice: accounting concepts are usually interpreted as reflecting the reality that exists somewhere “out there.≓ From the ontological point of view, this corresponds to realism in philosophy. However, it seems that this interpretation is insufficient if we wish to gain a more thorough understanding of the significance and the roles of accounting in organizations and society. It is argued that in order to deepen this understanding it will be necessary to reduce the dominant role of realistic ontology in favour of idealistic ontology. In line with this it is suggested that the social constructivist view might offer a common and fruitful basis for the interpretation of the basic nature of accounting concepts. A detailed ontological analysis of the concept of profit is presented to support this basic argument.