Conventional financial accounting primarily focuses

Conventional financial accounting primarily focuses on the measurement and reporting of business transactions between two or more business firms. Financial statements prepared under financial accounting are basically meant to serve the needs of shareholders and potential investors in making sound economic decisions. Exchanges between a firm and its social environment are practically ignored. The conventional financial reporting system is designed to gather process and report financial results and operating statistics with no regard to social performance information of business enterprises. This nature of financial accounting has led to, in recent years, a serious debate that business activity should conform to socially, and desirable ends, e.g., that products should not be harmful to users, the pursuit of profit should be constrained by social considerations; the environment should be protected from industrial malpractices in the form of pollution of every kind; and employees should have a right to security of employment. As business enterprises respond to pressures of new dimension–social, human and environmental–they may not necessarily change their basic business goals, but they will alter them to reflect the new constraints to be satisfied. The technology of an economic system imposes a structure on its society which not only determines its economic activities but also influences its social relationships and well–being. Therefore, a measure limited to economic consequences is inadequate as an appraisal of the cause-effect relationships of the total system; it neglects the social effects.

The term ‘social accounting’ is of recent origin and many other terms like, ‘social audit’ ‘socio-economic accounting’, ‘social cost benefit analysis’, ‘report on corporate social policies’, ‘social information system’, ‘social accounting’, ‘social responsibility accounting’ etc. are often interchangeably used for this. Now –a –days it is being realized that commercial evaluation of business units is not sufficient to justify commitment of funds to a business unit. Rather evaluation will be complete only if it takes into consideration social cost and benefits associated with them