THE fundamental problems in every economy concern what, how, and for whom to produce its goods and services; and the firm, being the microeconomic unit of the production sector, plays an important role toward effecting a solution to these problems, especially in a market economy such as that of the United States. As the firm engages in its operations, information about its economic behavior is produced by the firm's accounting process. Inside the firm, this information is used by management for directing and controlling the operations of the firm.
Outside the firm, it is used, in various economic decisions (1) which combine to effect a solution to the fundamental problems and (2) which are responsible for overseeing that the manner of arriving at the solution is socially and politically acceptable. There does not exist in the literature a well-formulated frame of reference for viewing the firm's accounting in its role of providing information which ties together the managerial processes and activities within the firm and links the firm to its environment