Theories Of Positive Accounting

If some research is undertaken that provides evidence that capital markets do not always behave in accordance with the Efficient Market Hypothesis, does this invalidate research that adopts an assumption that capital markets are efficient?

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What makes a large organization like Wal-Mart financially successful? One could say it is the result of outstanding personnel or perhaps a strong determination to succeed. These factors certainly contribute. However the key to financial success in organizations lies in good accounting. Since early civilization began, accounting has been an important part of our financial transactions. In today’s world our use of modern accounting systems and accurate financial statements are critical components that make modern organizations successful. To facilitate understanding of this point one must understand how

Positive Accounting Theory (PAT) aims to make good predictions of actual world events and convert them to accounting transactions. Its general objective is to understand and predict the choice of accounting policies across conflicting firms. It recognises that economic consequences exist. In relation to PAT, because there is a need to be efficient, the firm will want to minimise costs associated with the performance indicators used by the firm.

The purpose of accounting is to record the financial information, such as transactions and performance, related to a business. The accounting profession has been in existence for as long as business transactions have occurred. It wasn’t until 1494, however, when Luca Pacioli, a Venetian merchant, wrote Summa de Arithmetica, Geometrio, Proportioni et Proportionalita. His writings described a two-entry system of debits and credits, which became the basis for modern accounting systems. Three centuries later, with the emergence of the Industrial Revolution and the development of corporations, the profession of being an accountant became a necessity to keep track of the rising costs and cash flows. As a result, the American Association of Public

MC Wells ‘A Revolution in Accounting Thought’. The Accounting Review. V.LI. No.3. July 1976. pp471-82. The article does not have an abstract – write an abstract of no more than 400 words. A short guide to writing an abstract is provided. ----Answered by Wenxin

When talking about accounting, the first thing we should know is the history of its development. Traditionally, the development is from inductive to deductive. Inductive theory assume what is done by the majority is the most appropriate practice. However, It did not seek to evaluate the logic or merit of

Therefore, they require acceptance rather than mere adherence. The article presents individual principles which are applied to accounting: utilitarianism and deontological. Pros and cons of utilitarianism when applied to accounting, its influence in the business context in the sense that most economic and finance concepts are implicitly or explicitly built on the assumption that companies are interested in maximizing short-term self-interest. However, the accounting concepts are often presented as neutral or as morally correct, and accounting control has a moral quality (Preuss,

In this article, Miller et al. concern about the understanding of the historical foundation of accounting practice by investigating how theories of costing and budgeting were constructed in the first thirty years of the 20th century. In addition, the authors suggest several radical factors of theoretical understanding of accounting in relation to the other social and organizational practices.

Firstly, it is crucial to acknowledge of the Positive Accounting Theory. According to Deegan & Samkin (n.d.), Positive Accounting Theory explains and predicts accounting practice and does not seek to determine particular actions. For instance, which accounting policies will be choosen by firms and how newly proposed accounting standard will be reacted to by firms (Deegan & Samkin n.d.). In the same report, the author claims the first aspect of Positive Accounting Theory, which is “Explanation” means providing reasons for observed practice. For example, positive accounting theory pursues to explain why historical cost accounting continues being used by firms and why convinced firms switch between a numbers of accounting techniques. The second factor, which is “Prediction” indicates that the theory predicts “unobserved phenomena” (Deegan & Samkin n.d.). The author clarifies that this phenomena is not necessarily a future phenomena, they

Bahnson, Paul R and Paul B.W. Miller (2008). The Spirit of Accounting: What Good are Principles Without Principles? Accounting Today 22. Retrieved from: http://0search.ebscohost.com

Another theory used in accounting is that of Materiality. This notion necessitates that accounting centers on material facts and not on facts that are immaterial to figuring revenues. Only transactions that have monetary

Assets, liabilities, equity, revenue, and expenses has their own balance. A company will produce a trial balance which will give the balance of all these in a certain amount of time such as monthly, quarterly, or annually. The trial balance ensures that account balance is accurate. If the accounting equation isn’t balanced out then there is an error in the accounting records.

It has been become an issue of great concern that the accounting profession must find a common theory in order to address and put the issue at rest. This therefore, has called for the study of this topic under review “the demand for and supply of accounting theories: the market for excuses. As a result of this several questions have been raised. For instance, the question of why accounting theories are predominantly normative has been put forward by this article? Secondly, why no single theory in accounting profession that is generally or widely accepted? It has been argued that the financial accounting theories have been found to be ineffective most especially in the area of impacting accounting practice and policy, though, this has been

The definition of accounting theory according to Coetsee (2010) is described in two different ways. The first philosophy concludes that accounting theory is a set of general principles that guide the evolution of accounting practice. The other philosophy describes accounting theory as activity of explaining and predicting accounting practice. What the viewer can see from the statement of the first philosophy is that the accounting theory exists before accounting practices meanwhile the latter states that the accounting practice exists before the theory. Since there are many arguments about this matter, many academic researchers have concluded that accounting theory can be divided into two categories which are positive and normative theory.