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Development of Acc Theory
Development of Acc Theory
After completed this topic, you should be able to: Describe the classifications to the development of accounting theory: pragmatic approach, normative approach, positive approach and behavioral approach.
accounting theory is useful to us? By classify the theories according to the assumptions they rely on, how they formulate the theories and explain.
1. Pragmatic Approach
Based on observation of the behavior of
the accountants or the users of FS generated by accountants Effect of words/symbol to people Accounting principles were found to be useful and generally accepted, regardless whether they were tested for any relevance to a particular problem
DBF 213 ACCOUNTIG THEORY AND PRACTICE
1. Pragmatic Approach
Descriptive Pragmatic Approach Developed from continual observing of the behavior of accountants, so that it can be copied (inductive) Critics: i) not analyze whether the accountants are reporting in the manner they should reporting (e.g: classroom, new accountant) ii) focusing on accountants behavior
a)
DBF 213 ACCOUNTIG THEORY AND PRACTICE
1. Pragmatic Approach
b) Psychological Pragmatic Approach Examine closely to the users responses to the accountants output Critic: i) some users react illogical manner, not realistic
2. Normative Approach
1950s and 1960s
Approach concern on what should be
done rather than analyzing and explaining current or accepted practice Criticism: i. Based on prediction ii. No verification
management is profit maximisation 4. Provision of information for decision making as main function of decision making
3. Positive Approach
1970s
Testing or relating accounting hypothesis
Explaining the reasons for current practice Predict the role of accounting and information in the economic decision (individual, firms etc)
DBF 213 ACCOUNTIG THEORY AND PRACTICE
3. Positive Approach
Positive theories being tested using
scientific methods to gather the evidence. The evidence must be unbiased, external and can be verified Critics: i) not much development
4. Behavioral Approach
Psychology, sociology and
organizational theories To discover why people behave as they do Behavioral approach focus on:
Judgement and decision making of accountants and auditors The influence of the output on users judgement and decision making
DBF 213 ACCOUNTIG THEORY AND PRACTICE