Descriptive accounting theory. MCQs Accounting theory 2022-11-16
Descriptive accounting theory
Descriptive accounting theory refers to the study of accounting practices as they exist in the real world. It is concerned with understanding and explaining how accounting practices are used and how they evolve over time.
One of the main goals of descriptive accounting theory is to provide a comprehensive and accurate representation of accounting practices as they are actually used. This involves examining the various accounting techniques, methods, and standards that are used by different organizations and industries. It also involves studying the ways in which these practices are influenced by external factors, such as regulatory requirements, economic conditions, and social and cultural norms.
One key aspect of descriptive accounting theory is the recognition that accounting practices are not fixed or universal, but rather are shaped by the specific needs and goals of the organizations that use them. For example, different industries may have distinct accounting practices that are tailored to their unique business models and operating environments.
In addition to understanding the diversity of accounting practices, descriptive accounting theory also seeks to identify common themes and patterns that may emerge across different contexts. This can help to identify best practices and provide guidance for practitioners on how to apply accounting principles in a consistent and effective manner.
Another important aspect of descriptive accounting theory is the role that it can play in informing policy and regulatory decisions. By providing a detailed and nuanced understanding of how accounting practices are actually used in the real world, it can help policymakers and regulators to craft more effective and realistic rules and standards that are better able to meet the needs of the organizations and industries they seek to regulate.
In conclusion, descriptive accounting theory is a critical field of study that plays a vital role in understanding and explaining the diverse and evolving world of accounting practices. It helps to provide a comprehensive and accurate representation of how accounting is used in the real world, and helps to inform policy and regulatory decisions in a way that is grounded in a deep understanding of the realities of accounting practices.
What Are the Basic Accounting Theories?
Continuously Contemporary Accounting Theory C. The practice of accounting is always guided and influenced by conventions, doctrines, and various other rules and methods which have been accepted by all. The accounts receivable account is a liability account. So it is less dynamic. However, that accounting is a behavioral science is beyond question. Ethical approach: The basic core of the ethical approach consists of the concepts of fairness, justice, equity and truth.
Accounting and its objectives
The same point is emphasized well by Heilbroner when he states that: Capitalist practice turns the unit of money in a tool of rational cost-profit calculations, of which the towering monument is double-entry bookkeeping primarily the product of the evolution of economic rationality; the cost-profit calculus, in turn reacts on that rationality by crystallizing and defining numerically, it powerfully propels the logic of enterprise. In accounting, as in most areas of business, considering a variety of options yields the most effective strategy for longevity and financial health. What makes accounting a language? Generally accepted accounting principles, widely used customs, conventions, doctrines, procedures and postulates constitute accounting theories. The Securities and Exchange Commission suggests that a line item that represents less than 5 percent of a budget need not be accounted for, but that anything over that amount should be. The principles behind these theories have given rise over time to the actual practices employed by accountants to ensure finances are properly managed and tracked. Of course, accounting software has replaced physical journals in most businesses, but the programs use the same basic accounting journals to keep track of finances.
Descriptive accounting theory Free Essays
True income theories D. These images are accounting as a language, accounting as a historical record, accounting as a current economic reality, accounting as an information system, accounting as a commodity and finally accounting as an ideology. The classification of accounts receivable is consistent with the observed classification of receivables. Descriptive accounting theory: It explains the causes and effects of the day-to-day events of our life. Monthly financial reports for management C.
Accounting Theory : Definition and Classification
Arguments cannot be rejected on the basis of observation; only on whether they are logical or not. There was very limited uniformity between the accounting methods adopted by different organisations, thereby creating comparability problems. However, these kinds of concepts often fail to show how new problems should be solved. For example: The emergence of the image of accounting as a commodity again provides a striking example of the manner in which accounting thought reflects its social content. Theories, as such, cannot help us to know the financial position of the business or the amount of Profit or Loss during a particular period. Hence, a theory can be developed from observations of how accountants act in certain situations.
The logic of the argument and the assumptions on which it is based C. Accountants used rules of which they were aware, and which they believed were most appropriate to the particular circumstances. As the language of The Sun is no sunrays, as that of a flower is its fragrance, and as the same of a thunderbolt is its lightning, so also the language of a business is accounting. Accounting Theory Introduction Accounting is a very old science as it is strictly related to the first forms of trade in the old world. For example, the last in, first out LIFO method will be a more attractive accounting technique during periods of continuing inflation than the first in, first out FIFO or average cost methods, because LJFO is assumed to produce a lower annual net income assuming higher, more inflated costs for the goods sold. Whatever approach is chosen, it is important to remember that an accounting theory must be confirmed to be accepted.
Accounting Theory Chapter 2 complianceportal.american.edu
A man does not anything without any sound reason. Not only that, theories also help the accountant in solving real world accounting problems which may crop up during the practice of accounting. Instead, different theories have been and continue to be proposed in the literature. The pragmatic approach consists of the construction of a theory characterized by its conformity to real-world practices that is useful in terms of suggesting practice solutions. It refers to what accountant do in practice. Positive accounting research first focused on empirically testing some of the assumptions made by the normative accounting theorists. Whether the practice or method being used is the most equitable C.
All of the given options are normative accounting theories. Advent of various branches of Accounting The Joint Stock Companies necessitated efficient cost management and strategic decisions making, so Cost Accounting and Management Accounting were introduced to fulfil the needs. To be absolutely able to solve any real world accounting problem, an accountant should have sufficient practical experience aided by adequate theoretical knowledge. Accounting theory explains accounting practices and guides to keep pace with fast changing environment. Accounting is so important in the business world that only on the basis of accounting information, management is able to make investment decisions, and optimize internal operation.
Descriptive and Prescriptive Accounting Concepts
Deductive approach: The deductive approach to the construction of any theory begins with basic propositions and proceeds to derive logical conclusions about the subject under consideration. It aims towards full disclosure of the information to the users to safeguard their interest in the firm. If the set hypothesis holds good in all situations, it is considered as a theory. Accounting was largely determined by generally accepted practice. In that case some practical events from reality are chosen and with those practical events imagination is mixed and mingled in such a manner so as to be represented as a new novel subject. If the accountant has got sufficient knowledge of accounting theory, he can easily find these out and administer advices to the management as to the way of future protection.
MCQs Accounting theory
All of the given options are correct. Hendriksen Thus, theory refers to a set of statements, which provides logical reasons behind events and phenomenon. Logic to accounting practice It provides logical framework to the accounting practices. The company has reported a record profit, therefore it is automatically worthy of support. The qualitative Characteristic of any accounting information system is maintained by the sound internal control system. Advent of Various Theories Various new theories, principles, doctrines developed due to growth of limited companies. Even if an ordinary man can be imparted with proper theoretical knowledge and practical training, it is sure that he will turn out to be a good accountant.
Traditional Approaches to Accounting Formulation Theory
It considers the value of the dollar and whether this value might remain consistent or change over time. The argument is illogical. One is always dependent on the other. Statement 2: Some of the fixed assets in the company are plant and machinery. Specifically, measured income is used as a computed amount to accomplish objectives necessary for the operation of society- The sociological approach to the formulation of an accounting formulation theory has centralized to the evolution of a new accounting sub discipline, known as socioeconomic accounting. Accounting Practices are considered as valid media for conveying various information to different interested parties.