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    2021 08 23 21 39 46 A031191111 Accounting Theory Construction PPT

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    andi Tenri
    This document discusses various accounting theories, including pragmatic, normative, and positive theories. Pragmatic theories take either a descriptive approach, examining how accountants actually behave, or a psychological approach, looking at how users react to accountants' outputs. Normative theories from the 1950s-1960s aimed to derive true income and enhance decision usefulness. Positive theories, emerging in the 1970s, are descriptive, explanatory, and predictive of how accounting information influences decision making. The document also compares scientific and naturalistic approaches to accounting research.

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    2021 08 23 21 39 46 A031191111 Accounting Theory Construction PPT

    Uploaded by

    andi Tenri
    138 views18 pages
    This document discusses various accounting theories, including pragmatic, normative, and positive theories. Pragmatic theories take either a descriptive approach, examining how accountants actually behave, or a psychological approach, looking at how users react to accountants' outputs. Normative theories from the 1950s-1960s aimed to derive true income and enhance decision usefulness. Positive theories, emerging in the 1970s, are descriptive, explanatory, and predictive of how accounting information influences decision making. The document also compares scientific and naturalistic approaches to accounting research.

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    2021_08_23_21_39_46_A031191111_Accounting_Theory_Construction_PPT

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    This document discusses various accounting theories, including pragmatic, normative, and positive theories. Pragmatic theories take either a descriptive approach, examining how accountants actually behave, or a psychological approach, looking at how users react to accountants' outputs. Normative theories from the 1950s-1960s aimed to derive true income and enhance decision usefulness. Positive theories, emerging in the 1970s, are descriptive, explanatory, and predictive of how accounting information influences decision making. The document also compares scientific and naturalistic approaches to accounting research.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    138 views18 pages

    2021 08 23 21 39 46 A031191111 Accounting Theory Construction PPT

    Uploaded by

    andi Tenri
    This document discusses various accounting theories, including pragmatic, normative, and positive theories. Pragmatic theories take either a descriptive approach, examining how accountants actually behave, or a psychological approach, looking at how users react to accountants' outputs. Normative theories from the 1950s-1960s aimed to derive true income and enhance decision usefulness. Positive theories, emerging in the 1970s, are descriptive, explanatory, and predictive of how accounting information influences decision making. The document also compares scientific and naturalistic approaches to accounting research.

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    of 18

    ACCOUNTING THEORY

    ACCOUNTING

    THEORY

    CONSTRUCTION

    FERENICA

    &
    ANDI
    PRAGMATIC

    THEORIES

    Descriptive paragmatic approach :


    based on observed behaviour of accountants

    theory developed from how accountants act in

    certain situations

    tested by observing whether accountants do act in

    the way the theory suggests

    is an inductive approach
    PRAGMATIC

    THEORIES (Cont.)
    •
    Criticisms of descriptive pragmatic approach :
    – ’
    does not consider the quality of an accountant s action

    –does not provide for accounting practices to be

    challenged

    – ’
    focuses on accountants behaviour not on measuring the

    attributes of the firm


    PRAGMATIC

    THEORIES (Cont.)
    Psychological pragmatic approach :
    theory depends on observations of the reactions of

    ’
    users to the accountants outputs

    a reaction is taken as evidence that the outputs are

    useful and contain relevant information


    Criticisms of the psychological

    pragmatic approach :
    PRAGMATIC
    -
    some users may react in an

    illogical manner

    THEORIES
    -
    some users might have a

    preconditioned response

    -
    (CONT.) some users may not react when

    they should

    Theories are therefore tested

    using large samples of people


    syntatic and

    semantic

    theory
    •
    Semantic inputs are the transactions and exchanges recorded in vouchers,
    journals and ledgers

    •
    The inputs are then manipulated on the basis of the premises and

    assumptions of historical cost accounting


    • Criticised because there is no independent empirical verification of the calculated outputs

    • The outputs may be criticised for poor syntax inaccurate e g . . different types of monetary measures

    are added together


    • The outputs may be syntactically accurate but nevertheless be valueless

    (
    due to a lack of semantic accuracy a lack of correspondence with real-
    ,
    world events transactions or values )
    • ‘ ’
    Historic cost accounting may produce accurate outputs but which

    nevertheless have little or no utility

    • ,
    That is they are not useful for economic decision making except to verify

    accounting entries
    NORMATIVE

    THEORIES

    •1950 s and 1960 ‘s golden age ’


    – policy recommendations

    –what should be

    – concentrated on deriving :
    •
    true income (
    profit)
    •
    practices that enhance decision usefulness -
    – based on analytic and empirical propositions

    •
    NORMATIVE

    THEORIES

    •
    True income :
    –a single measure for assets

    –a unique and correct profit figure

    •
    Decision usefulness :
    – -
    the basic objective of accounting is to aid the decision making process of

    ‘ ’
    certain users of accounting reports by providing useful accounting data
    THE

    DECISION

    PROCESS
    POSITIVE

    THEORIES
    POSITIVE

    THEORIES

    •
    Expanded during the 1970
    s

    • ‘ ’ ‘ ’
    Based on experiences or facts of the real world

    •
    Explain the reasons for current practice

    • -
    Predict the role of accounting information in decision making

    •
    The main difference between normative and positive theories is that

    –
    normative theories are prescriptive

    – ,
    positive theories are descriptive explanatory or predictive
    DIFFERENT

    PERSPECTIVE
    •Scientific approach :
    –
    has an inherent assumption that the world to be researched is an objective

    reality

    – is carried out by incremental hypotheses

    – has an implied assumption that a good theory holds under circumstances

    ,
    that are constant across firms industries and time
    •Criticism of the scientific method :
    – -
    large scale statistical research tends to lump everything together

    –
    it is conducted in environments that are often remote from the world of

    or the concerns of accountants

    •
    Naturalistic approach:
    –
    implies that there are no preconceived assumptions or theories

    – - -
    focuses on firm specific real world problems
    Thank you

    for your

    attention !

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