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The two main theoretical approaches in accounting theory are the normative approach and the positive approach. The two alternati
Finance & Accounting
Pages 14 (3514 words)
Accounting Theory Table of Contents Introduction 3 Positive Approach 4 Advantages of Positive Approach 5 Disadvantages of Positive Approach 5 Normative Approach 6 Advantages of Normative Approach 7 Disadvantage of Normative Approach 8 Evidence of Positive Approach 8 Efficient Market Hypothesis 9 Agency Theory 10 Contracting Theory 11 Evidence of Normative Approach 11 Historical Cost Accounting 11 Current Purchasing Power Accounting 12 Current Cost Accounting 12 Comparison between Positive and Normative Approach 13 Relationship between Positive and Normative Approach 14 Conclusion 14 Reference 15 Introduction Accounting is practiced within an implied theoretical framework compiled of principle
The study of accounting theory enables to understand our past and provide us a positive reception of how our recent practices and problems came into being. Historical investigation also tells that certain problems are continuing and may not be capable of an everlasting solution for example accounting for intangible and changing price levels. The accounting theory’s development came up because of needs and changes in accounting concepts and techniques. The main purpose of accounting is to plan periodic matching of revenues and cost. The accounting theory is classified into positive and normative accounting theory. ...
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