Accounting systems, participation in budgeting, and performance evaluation

Article Abstract:

Accounting numbers are often used to measure employees' performance since the numbers are the major formal source of data in companies. A model using principal-agent analysis to relate employee compensation to accounting data divides activities into those that influence accounting measurements directly and those that do not. The model was used to research the hypothesis that the crucial link in determinations of the economic value of employee participation in the budgetary process is the relationship between performance evaluation and accounting systems. In situations where an employee's information has no economic value, information concerning indirectly related activities may not be useful because it may have no effect on motivating an employee. If indirectly related activities have high costs for an employee, it is necessary for a principal to have access to data to adjust an employee's compensation.

Methods, Accounting and auditing, Employee performance appraisals, Performance appraisals

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Fully revealing income measurement

Article Abstract:

Accounting theory is predominated by two approaches, income measurement, which is based on the valuation process central to capital markets, and information economics, which is used to model uncertainty and informative commodities. Income measurement views income as economic income plus errors arising from institutional constraints and tends to leave the demand for accounting services outside of formal theory. Information economics views income as an informative random variable that assists in deriving an entity's economic norm and views most of the accounting structure outside of formal theory. By linking income measurement as a process for conveying information, the two processes can be synthesized by using a language of asset valuation or income measurement.

Research, Income accounting

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