What Is Social Contract Accounting
Social Contract Accounting accounts for the social contract between an organisation and society.
Society bestows a series of legal rights on an organisation. They include rights such as relating to property, intangible assets, trading contracts, finance and ownership. Society also provides the legal framework on which the organisation depends for its existence. The rights are offered as part of a social contract. They are offered to an organisation in exchange for its contribution to society.
Part of an organisation’s contribution to society is delivered by way of its primary outputs. Building roads is every much a part of contributing to society as caring for people who are homeless. Almost all contributions to an effective society comprise many parts. The people who lay tarmac are every bit as integral to the road as the people who extract the raw materials, the board who coordinates the input of the tens of thousands of people who contribute, and as the people who clean the toilets in the administrative office.
Monetary accounting provides the universally understood measure of profits which seeks to provide information about the effectiveness of an organisation through monetary measures alone. Corporate reports provide additional textual information to enrich an understanding of the monetary measures. This method of accounting is consistent with assessing an economy through monetary GDP.
The financial crisis of 2007 highlit the limitations of monetary GDP in measuring economic success. New economic models have emerged that measure success in terms of human experiences, such as wellbeing, prosperity or quality of life, to supplement monetary GDP. Social contract accounting extends monetary accounting for an organisation’s activities to be consistent with the human-centred supplement to GDP.
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