Why Study Accounting Theory - Accounting Assignment Help

Assignment Task

Welcome to Accounting Theory
Theory is about practice. If we are informed about our subject, we can hardly be content with its frequent deficiencies, its incapacity to stand up tothe canons of scientific method.  If we are applying a method which lacks obvious inconsistencies, our practice will be the  more confident, our conclusions more informed, our services to our management or to our clients more valuable (Chambers,1950).

Objectives
Explain the importance of studying ‘theory’
Discuss accounting theory and the purpose it has served over time.
Define philosophy of science based on various perspectives and explain how it applies to accounting;
Identify several theories in accounting and recognise that theories often perform different functions;
Express that theories are tied to value judgements; and
Appraise that theories should be critically evaluated against the criteria of advancing knowledge.

Why study accounting theory
Accounting is a very powerful discipline
Profit/size of net assets seems to be the major criteria for many decisions
These numbers are arrived at using accounting techniques which aren’t necessarily full proof.
Accounting theory is being developed to answer such questions as 
Is this the correct profit?
Should profit be the measure of business success?

Accounting theories
Prescribe how an item should be accounted for
Predict the selection of accounting methods
Explain what accounting information will be given to outsiders
Predict the relevant power of stakeholders

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