Department of Accounting and Finance, University of Vaasa,
Finland

1. Purpose

Accounting has, aptly, often been called the language of business. General accounting concepts are used in communication between researchers in the accounting field in different countries. The accounting rules, conventions and practices as well as accounting legislation vary, however, in some degree from country to country. The concepts used in teaching financial accounting to business students may also differ in a fundamental manner.

The purpose of this paper in the area of comparative accounting is to facilitate communication about Finnish accounting research and the concepts used in teaching financial accounting in Finland. This is done by reviewing the "expenditure-revenue-accounting" model applied in Finland. This accounting model is of general interest because it is an example of taking an unconventional approach to the going concern convention, and developing the accounting model starting from the income statement concepts rather than the internationally more common expansion from the balance sheet concepts.

The expenditure-revenue accounting model as propounded in the Finnish language is attributed solely to late professor Martti Saario _1/. This accounting theory has been the dominant basis of financial accounting legislation and teaching in Finland.

The the financial accounting practices based on the expenditure-revenue accounting theory resemble in many respects the accounting practices based on the American Generally accepted accounting principles, the GAAP. It will be assumed throughout this paper that the reader is reasonably familiar with the GAAP.

This paper is a review of Professor Saario's accounting theory. The presentation is based on my own interpretation of expenditure-revenue accounting and GAAP. An attempt is made not to express any personal preferences concerning the choice of the accounting concepts. The evaluation of the potential merits or dismerits of Professor Saario's expenditure-revenue accounting as a background for financial accounting practices and teaching, as compared with accounting practices based on GAAP, will be the reader's.

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