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Positive Theory of Accounting

In: Business and Management

Submitted By koxnox
Words 1357
Pages 6
Synopsis

Positive accounting theory is perceived as a hypothetical study in accounting which helps in clarifying and foreseeing tangible accounting procedures. These theories have a tendency to rationalize why a number of accounting practices are accepted than others. Positive accounting theory was introduced to better apprehend exactly how practices in accounting must be effectively managed.

Introduction

Modern positive accounting research began flourishing in the 1960’s and other introduce empirical finance method to financial accounting. The subsequent literature adopted the assumption that accounting number supply information for security market investment decision and used the information perspective to investigate the relation between accounting number and stack prices. The information perspective has taught us much about the market’s use of accounting numbers. It was structured as an educational thought of discipline by the efforts of Ross Watts and Jerold Zimmerman which when made known were received with extensive criticism.

Summary of the Article

Positive accounting can be related with the predetermined opinion of a firm. A firm is regarded as a conception initiative put forth by a number of economists and legal commentators which stresses that corporations are nothing more than a compilation of agreements concerning different parties – mostly shareholders, directors, employees, suppliers, customers and accounting – one tool to expedite the materialization and performance of contracts. In this regard, accounting practices progress to lessen contracting expenses by creating settlement between wavering parties. For instance, positive accounting proposes that traditionalism in accounting – in this viewpoint described in principle as obliging lower and/or higher measures of verifiability to distinguish losses and/or gains; has sources in...

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