Let us make in-depth study of the concept definition,

features and benefits of social accounting.

Concept of Social Accounting:
Business is a socio-economic activity and it draws its inputs from the
society, hence its objective should be the welfare of the society. It
should owe a responsibility towards solving many of the social
problems. In the present age of growing technological, economic,
cultural and social awareness, the accounting has not only to fulfill its
stewardship function for the owners of the enterprise, but also
accomplish its social function.

Changing environments and social parameters have compelled

business enterprises to account and report information with regard to
discharge of their social responsibilities. The boundaries of the
principles, practices and skills of conventional accounting have been
extended to such areas for social disclosure and attestation with
regard to the measures of social programmes.

The concept of ‘Social Accounting’ has gained importance as a result of

high level industrialization which has brought prosperity as well as
many problems to the society. It has necessitated the corporate sector,
with huge amounts of funds at their disposal, to invest substantial
amounts in social activities so as to nullify the adverse effects of
industrialization. “In modern times, accounting efforts have been
extended to the assessment of the state of society and of the social
programmes not for the satisfaction of any individual or group but for
the application of evaluative procedures in the allocation of resources
towards better social well being as a whole.”
Social accounting is concerned with the study and analysis of
accounting practice of those activities of an organisation. The concept
of socialistic pattern of society, civil rights movements, environmental
protection and ecological conservation groups, increasing awareness
of society towards corporate social contribution, etc. Have contributed
towards the growing importance of Social accounting.

Social Accounting, also known as Social Responsibility Accounting,

Socio-Economic Accounting, Social Reporting and Social Audit, aims
to measure and inform the general public about the social welfare
activities undertaken by the enterprise and their effects on the society.

As per F.F. Perry’s Dictionary of banking, social accounting is the

reporting of the cost incurred in employing with anti-pollution, safety
and health and other societal beneficial requirements and, more
generally the impact of business entity on the endeavor to project
society its amenities and the environment.

In the words of Richard Dobbins and David Fanning, social accounting

is “the measurement and reporting of information concerning the
impact of an entity and its activities on society.” The National
Association of Accountants (NAA) Committee defined social
accounting as ‘the identification, measurement, monitoring and
reporting of the social and economic effects of an institution on
society.” It is, thus clear that social accounting is concerned with the
internal and external reporting of social costs and benefits both in
quantitative as well as qualitative terms by a business enterprise.
The term ‘social audit’ has in the past been mostly linked with ‘social
accounting’ and the two terms have been used interchangeably in the
literature. However, some writers on the subject use the term social
accounting as distinct from the term social audit. Social audit is an
objective assessment of a business enterprise as to how it has been
able to discharge its social obligations in the course of its operations.
The concept of social audit is a new emerging dimension in the audit
literature. It is neither a statutory audit nor a performance audit, but a
mixture of both.

Definitions of Social Accounting:

Social Accounting:
“Social Accounting is the application of double entry book keeping to
social economic analysis.” —Kohler

Comments:
This is an orthodox definition as it is based on application of book
keeping principles rather than sophisticated techniques of
management accounting to the national socio-economic situation.

“The measurement and reporting, internal and external, of

information concerning the impact of an entity and its activities on
society.” —Ralph Estes

Comments:
He viewed that social accounting as an independent discipline which is
to measure and report the activities of an entity in so far as they effect
the society.
“Social accounting as the means by which the effects of social
programmes are attempted to be expressed in some type of
quantitative terms. —Leonard Spacer

“Social Accounting is the expansion of the existing boundaries of the

accounting beyond the normal economic consequences” —Salivary

Features of Social Accounting:

(i) Social accounting is an expression of a company’s social
responsibilities.

(ii) Social accounting is related to the use of social resources.

(iii) Social accounting emphasize on relationship between firm and

society.

(iv) Social accounting determines desirability of the firm in society.

(v) Social accounting is application of accounting on social sciences.

(vi) Social accounting emphasizes on social costs as well as social

benefits.

S.C. Mobley has explained the hypothesis on which social accounting

is based in his article “Challenges of socio economic accounting” in
October 1970, the Accounting Review “The technology of an economic
system imposes a structure on its society which not only determines
its economic activities but also influences its social relationship and
well being. Therefore a measure limited to economic consequences is
inadequate as an appraisal of the cause and effect relationships of the
total system, it neglects the social effects.”

The True blood committee report on the objectives of traditional

financial statements in 1973 broke with traditional orientation of them
toward stewardship reporting and instead added new dimensions of
socio economic to the scope of accounting literature.

True blood committee report on “the objectives of financial

statements” has stated that “an objective of financial statements is to
report on those activities of the enterprise affecting society which can
be determined and described or measured and which are important to
the role of the enterprise in its social environment.”

This quote of true blood committee itself confirms formal recognition

of social accounting. Debate initiated in 1960 with slogan “Profits
should not be the sole objective of the business” in the management
literatures, is now dominating in accounting literature, attempts are
being made to align profit to other social goals. The term “social
profit” has emerged and being considered as a barometer of
responsible business behaviour, A series of published work initiated in
1960 by C.G. Mobley. Coopers (1972) AICPA committee on social
measurement (1977) Ramanathan (1976) Belkaoui (1976), Owens
(1992) and Roberts (1992) are still going on in most of the developed
nations like U.K. and U.S.A. These published works are evidence of
recognition of social accounting throughout the whole globe.

Need/Benefits of Social Accounting:

The important benefits of social accounting are as follows:
(1) A firm fulfills its social obligations and informs its members, the
government and the general public to enables everybody to form
correct opinion.

(2) It counters the adverse publicity or criticism leveled by hostile

media and voluntary social organisations.

(3) It assists management in formulating appropriate policies and

programmes.

(4) Through social accounting the firm proves that it is not socially
unethical in view of moral cultures and environmental degradation.

(5) It acts as an evidence of social commitment.

(6) It improves employee motivation.

(7) Social accounting is necessary from the view point of public

interest groups, social organisations investors and government.

(8) It improves the image of the firm.

(9) Through social accounting, the management gets feedback on its

policies aimed at the welfare of the society.

(10) It helps in marketing through greater customer support.

(11) It improves the confidence of shareholders of the firm.

What is Social Accounting?

Social Accounting is a first and primary accounting. Similar to traditional

accounting, it is a method of calculating a company’s performance. Only
with social accounting, performance is used generally to include social and
environment effects.

Definition of Social Accounting:

We can define social accounting as;

“Social accounting (also known as social accounting and

auditing, social and environmental accounting, corporate social
reporting, corporate social responsibility reporting, non-financial
reporting or accounting) is the process of communicating the social
and environmental effects of organizations’ economic actions to
particular interest groups within society and to society at large”.

Explain Social Accounting

Social Accounting is the process of communicating the social and

environmental effects of organization’s economic actions to particular
interest groups within society and to society at large.

History of Social Accounting

Social accounting as an approach began developing in the UK in the early

1970s .
The public interest Research Group established Social Audit Ltd.

What is the Purpose of Social Accounting?

 Accountability
 Management Control

Scope of Social Accounting

 Formal accountability
 Self-reporting and third party audits
 Reporting areas
 Audience

Objective of Social Accounting

 Effective utilization of natural resources

 Help to employees
 Help to society
 Help to customers
 Help to investors

Benefits and Importance of Social Accounting:

 Social accounting will provide you with an ongoing record of how

your organization or enterprise has developed and changed over
time.
 You will get feedback on how things are going from the range of
people involved in your organization or enterprise.
 You will be able to identify the areas where things are working well
and not so well – and you can use this information to help continue
what you are doing well and make improvements to change what’s
not working so well.
 You will know how well you are achieving your aims and values.
Doing and the sorts impact it is having- information you can grants,
and for promoting what you do.
Disadvantages or 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.

Challenges of Social Accounting:

For small member based community organizations and enterprises, the

biggest challenges are finding a way to regularly carry out social
accounting with no staff, no time and no budget! It is, therefore, important
the social accounting process is as simple as possible so that it does not
impose too heavy a burden on members.

Social Accounting Techniques:

Social accounting Based on Three Steps

1. Planning identification stage:

1. The first step is to identify three key elements of your
community organization or enterprise.
2. Values, aims, and objectives
3. Activities
2. Accounting – deciding on the scope and setting up the social
accounting System
1. Design
2. Collect information
3. characteristics
3. Reporting and auditing – collecting information
1. Relevant information
 2. Results

Uses of Social Accounting

Need for Social Accounting

Every time the question arise that why the need for social
accounting has arisen? the answer to this question is that the
social Accounting justifies its social responsibilities and informs its
members, the government, and the general public to enables
everybody to form a correct judgment.
 It helps management in formulating suitable policies and
programs.
 It acts as an evidence of social commitment.
 It improves employee motivation.
 It improves the image of the Organization.
 Through social accounting, the management gets a response
on its policies pointed at the welfare of the society.
 It helps in marketing through better customer support.
 It improves the assurance of shareholders of the firm.