Accounting

Theory and Its

Formulation
Ades Kurnia 1802111911
 Table of contents

01 02
Literature
Introduction
Review

03 04
Research Method Conclusion
01
Introduction
Kenneth S. Most (1982) defines theory as "a systematic statement of the rules or principles that underlie or guide a
set of phenomena." Theory can also be considered as a framework or arrangement of ideas, explanation of
phenomena, and predictions of future behavior. Theory is a systematic and scientific explanation. Kenneth added
that the theory has three dimensions as follows:

Note 1 Note 2 Note 3

Reductionism Instrumentalism Realism
Understanding Accounting
Theory

Vernon Kam (1986) reveals that accounting

theory is a comprehensive system which
includes postulates and theories related to it
then divides the theoretical elements into
several elements: postulates and basic
assumptions, definitions, accounting
objectives, principles or standards, and
procedures or methods.
02
Literature
Review
 Accounting Theory

"Accounting theory is a concept of

postulate definition that presents a
systematic description of accounting
phenomena that explains the relationship
between variables and other variables in
the accounting structure with the intention
of being able to explain and predict
phenomena that may arise."
Hendricsen views accounting theory as a general set of principal that will:

 Provide a common frame of reference from which accounting practice is valued.

 The formulated accounting theory will not be able to keep up with the rapid economic, social,
technological and scientific developments.

The American Accounting Association’s committee on Concepts and Standards for

External Reports states that:
 There is no complete financial accounting theory that covers and fulfills the desires of all
circumstances and times effectively because of it.
 In the existing financial accounting literature, it is not accounting theory but a collection of theories
that can be formulated to overcome the differences in requirements desired by users of financial
statements.
03
Research
Method
 Belkaoui and Godfrey suggest that the following
methods are known in the literature.

01 02 03 04
Descriptive Normative Positive
Psychological
Method Method Method
Pragmatic.
(Pragmatic) (1950-1960) (1970)
 Approaches in Theory Formulation
According to Godfrey, in linking theory to reality, there are three types of
relationships, namely:

1 2 3

Syntatic Semantic Pragmatic

 Accounting Theory Formulation
Several approaches in the formulation of accounting theory according to Belkaoui are as follows:

Informal approaches are divided into:

 Pragmatic, practical, and non-theoretical

 Authoritarian approach.

The theoritical approaches are divided into:

 Deductive
 Inductive
04
Conclusion
 From the above discussion it can be concluded that accounting
theory is a definition concept that presents a systematic
description of accounting phenomena that explains the
relationship between variables and other variables in the
accounting structure with the intention of being able to explain
and predict phenomena that may arise. In formulating accounting
theory, there are several methods that can be used, namely the
descriptive method (pragmatic), psychological pragmatic,
normative methods and positive methods.
Then there are three types of relationships in the theory
formulation approach, namely syntatic, semantic and pragmatic.
Several approaches in the formulation of theory can be done with
informal and theoretical approaches.
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