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A Study on the Concepts and Importance of Green Accounting in India

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A Study on the Concepts and Importance of Green Accounting in India Compliance Engineering Journal ISSN NO: 0898-3577 A STUDY ON THE CONCEPTS AND IMPORTANCE OF GREEN ACCOUNTING IN INDIA Kannan. V. Unnithan1 *PhD Research Scholar, Roll No: 1505060005, Department of Commerce, Annamalai University, Annamalai Nagar, Tamil Nadu. Phone: 9645176828, Email ID: [email protected] Dr. M. Somasundaram2 *Professor of Commerce and Research Supervisor, Annamalai University. Abstract The Green Accounting term was first introduced into usual utilization by Economist and Professor Peter Wood in the 1980s. The key point of this paper is to analyze and study the accessible literature grounded on the green accounting and to recognise how it has been studied and assessed by various authors who are working in this study area. Firstly, to point out briefly the scope of Green Accounting such as internal and external aspects. Secondly, to list out the types of green accounting such as segment, eco-balance, corporate environmental accounts. Thirdly, to classify the Environment National Accounting such as system and standard of accounts. Fourthly, to briefly explain approaches of Green Accounting. Finally, to describe the limitations of Green Accounting in India. The Green Accounting also called as various names they are Environmental Accounting or Resource Accounting or Integrated Accounting. This paper focuses on the Concepts and Importance of Green Accounting in India. Keywords: Green Accounting, Green Life Cycle, Gross Domestic Product, System of National Account. 1. Introduction An account is a statement or measure that provides an assurance about the financial information. Accounting is discipline of measuring, conveying and analysing the financial venture. Green accounting is observed as a subtype of accounting proper. Green accounting is a management tool used for a wide range of purposes, such as enhancing environmental performance, controlling costs, investing in ‘cleaner’ technologies, developing ‘greener’ processes and products, and sharing decisions related to product mix, product retention, and product pricing. Green accounting is a developing field that identifies resource use, measures and communicates costs of a company or the national economy actual or possible effect on Volume 10, Issue 10, 2019 Page No: 221 Compliance Engineering Journal ISSN NO: 0898-3577 the environment. Green accounting is also known as to as environmental accounting which incorporates environmental assets and their source and merges function into national and corporate accounts. It is a common name for environmental and natural resource accounting. 2. Objectives of the Study The objective of the current study is to re-examine the following: i. To analyse the significance of Green Accounting in India ii. To analyze the concept, need, advantages and limitations of Green Accounting for progressing India. 3. Research Methodology The study has been done primarily on the basis of secondary data and information available from books and published works and reports. 4. History of Green Accounting The term Green Accounting has been announced since the 1980s and known as a management tools. The traditional System of National Account (SNA) was first implemented in the USA in 1942. The current scenario of Green Accounting and its most developed from, tenable accounting, has been receiving continues constant recognition in the academic accounting literature in the early 1990s. The concept started almost three decades ago in the early 1970s with important contributions. 5. Green Accounting System A Green Accounting system is composed of environmentally differentiated conventional accounting and ecological accounting. Environmentally differentiated accounting calculates the effect of the natural environment on a company in nominal or monetary terms. It calculates the effect a company has on the environment, but in physical unit (eg. Kilogram of waste produced) rather than monetary unit. It is linked to sustainability. 6. Objectives of Green Accounting Green Accounting is utilised to improve the amount of relevant for those who need it or can use it. Significant data relies on the scale and scope of coverage. It is to enhance the sustainable development. 7. Scope of Green Accounting The scope of Green Accounting or Environment Accounting is very wide. It includes corporate level, national & international level. The following aspects are included in Green Accounting: Internal and External Aspects. Volume 10, Issue 10, 2019 Page No: 222 Compliance Engineering Journal ISSN NO: 0898-3577 i. From Internal perspective investment made by the corporate sector for minimization of losses to environment. It consists of investment made into the environment saving equipment devices. This type of accounting is easy as money measurement is possible. ii. From external perspective all types of loss are secondarily due to business activities. It primarily includes: Degradation and destruction such as soil erosion, loss of bio diversity, water pollution, voice pollution, air pollution, problem of solid waste, coastal & marine pollution. Depletion of non-renewable natural resources i.e. loss emerged due to over exploitation of non-renewable natural resources such as minerals, water, gas, etc. Deforestation and Land uses of accounting are not easy, as losses to environment cannot be calculated accurately in money value. In addition, it is quite hard to decide that how much loss was occurred to the environment owing to a particular industry. 8. Types of Green Accounting (Environmental Accounting) Green management accounting is the process of identification, collection, estimation, analysis, internal reporting and use of materials and energy flow information. This type of accounting can be further classified in the following subsystems: i. Segment Environmental Accounting: This is an internal environmental accounting tool, in which one can select an investment activity, or a project, concerning to environmental conservation from among all processes of operations, and to analyse environmental effects for a certain period. ii. Eco Balance Environmental Accounting: This is an internal environmental accounting tool which is designed to support PDCA for sustainable environmental management activities. iii. Corporate Environmental Accounting: This is a tool which is aimed to inform the public about important information compiled in accordance with the Environmental Accounting. It should be called as Corporate Environmental Reporting. In this method the cost and effect (in monetary value and quantity) of its environmental conservation activities are used. iv. Environmental Financial Accounting: This strategy is based on reporting environmental liability costs and other significant environmental costs. v. Environmental National Accounting: It focuses on national resource stoke and externality costs etc. Volume 10, Issue 10, 2019 Page No: 223 Compliance Engineering Journal ISSN NO: 0898-3577 9. System of National Account (SNA) SNA may be defined as a set of accounts which the government compiles on a scheduled basis in order to track the activity of their economy. SNA data are primarily used to calculate major economic indicators such as GDP, GNP, saving rate and trade balance figure. The SNA observes the relationship between the environment and the economy from the perspective of economy. 10. Standard National Accounts (SNA) Framework Net Domestic Product (NDP) = C + I – D + X – M Where: NDP = Net Domestic Product C = final Consumption I = Investment (fixed capital) D = Depreciation X = Exports M = Imports Mistakenly used as measure of welfare, welfare not proportionate to consumption of produced goods. 11. Gross Domestic Product The Gross Domestic Product (GDP) is one of the chief indicators used to measure the health of a country's economy. It symbolises the total dollar value of all goods and services produced over a particular time limit; you can think of it as the size of the economy. The sum of all formally acknowledged final goods and services produced within a country in a given period of time GDP can be measured using the income approach, the output approach and expenditure approach. The GDP is calculated to measure the output of a nation. The formula is as follows; GDP = C+I+G+Xn Volume 10, Issue 10, 2019 Page No: 224 Compliance Engineering Journal ISSN NO: 0898-3577 Where: C – The total spending by households on goods and services. I – The investments firms make in new capital or those households make in real estate and homes. G – The spending government does on public goods. Xn – The spending of foreigners on goods produced by one nation (Exports) minus the spending our consumers do on goods produced abroad (Imports) The GDP of a specific nation in a particular year therefore equals the sum of C, I, G and Xn. i. Importance of GDP Gross Domestic Product is regarded by economists to be the most prominent measure of economic activity in nations for several reasons: It tells us something about the average size of various countries' economies It is a monetary measure, so it tells us how much income a nation earns in a year with the assumption that. When we divide GDP by the population, we get GDP per capita, which tells us how many goods and services the average person consumes in a country. When real GDP grows more than the population, that tells us that people on average, have more products than they did before. If you assume that having more stuff makes people better off, Then GDP per capita tells us how well settled people in society are.
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