Why is accounting not an exact science?

Answer 1

Accounting is not a science because it can be easily adjusted to achieve a favorable result. In mathematics, to solve the equation x-1=2, you have to solve it the way you're supposed to, or else you won't get the correct result. There is not much room for creativity. In accounting, however, there are many ways to "cook the book". For example, to accurately reflect the ability of a company to create value for its owners, the stockholders, accounting is mostly accrual basis, which means that you record revenues when you earn them and not when you receive cash as in cash-basis accounting, which is generally not accepted in preparing financial statements. But in accounting there exist methodologies such as the mark-to-market accounting that allows a company to record future profits on the very day a deal is signed. No matter how little cash actually comes in the door, to the outside world and to investors the company's profits can be whatever the company claims them to be. Think about the many cases of accounting scandal and fraud to see why accounting is not exactly a science. Science is a body of reliable knowledge that can be logically and rationally explained. Accounting doesn't always satisfy these criteria. It is more like an art, the expression or application of human creative skill and imagination.