Hum? A theoretical discussion? Perhaps that is all that it should be here, and an uneducated reader could walk away learning something valuable depending on what form of accounting is necessary for them and depending on their needs. But accrual accounting rocks! And it must be understood completely, to see if it's the right art to practice and if there's a worthwhile benefit. It's been a while since I considered this question thoroughly, but it's always out there in the subconscious, and a great question, and I wanna stir the pot of thought a little. Why not just accecpt the fact that there are various points of view with regard to "accounting" and the information collected and presented by many different professionals for many different purposes. Follow the money. Accounting is an art, not a science, although it could be an exact science, and may be in several yeas as Artificial Intelligence progresses. Be careful, the robots are coming. So why is the so much confusion? I'm not confused. Different people hope to use the numbers for different purposes, so imagine an eloquent system where one could flick a switch and have the acutal correct numbers change for different purposes. I remember the concept of objectivity (and other accounting principles/concepts), and believe in it theoretically, but it's proven to only be a theoritical concept. In actual prictice, hum? People are motivated by different things and needs, as one previous writer here wrote - he's got it right!!, and because they have to be. Materiality is also very important, in the right time and place. So you can see, there are conflicts built into the system. But GAAP must be followed in the right environment! No if's and's or butts.

I leave with this. Don't trust the analysts on Wall Street. I listen to what they say and do the opposite. Very profitable. Don't get me started. And don't solicit me, thats illegal as far as I'm concerned.

:-)
La Place got it write, but its impossible.
"If you know the velocity and the position of every particle in the universe, you can predict every future event". With that, think about the possible honesty of financial statements.