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Research methodology for the formulation of an accounting theory . 1. Inductive Method: Involve reasoning from the particular to the general. (Example: if every hare which we have observed eat grass ,by induction ,we may induce that all hares eat grass). .

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research methodology for the formulation of an accounting theory
Research methodology for the formulation of an accounting theory
  • 1. Inductive Method:

Involve reasoning from the particular to the general. (Example: if every hare which we have observed eat grass ,by induction ,we may induce that all hares eat grass).

research methodology for the formulation of an accounting theory1
Research methodology for the formulation of an accounting theory
  • 2. Deductive Method:

Involve reasoning from the general to the particular . (Example: if all hares eat grass ,we may by deduction ,infer that some hares eat grass) .

the sequence of research methodology
The Sequence of Research methodology

Observation

1

Hypothesis

2

Conclusion

4

Experiments

3

classification of accounting theory
Classification of Accounting theory
  • There are several ways of classifying accounting theory , as follows :

1.According to time(1915-stewardship Acc.), (1945- Decision usefulness),(1975- Responsibility Acc.).

2.Inductive & Deductive.

3.Normative & positive.

  • There are three main levels of theory. The levels are as follows :

1.Structural or (syntactical) theories.

2.Interpretational or (semantical) theories.

3.Behavioural or (pragmatic) theories.

slide5

Structural (syntactical ) Theories

- Theories explaining accounting practices are desirable to obtain greater insight into current practices ,permit a more precise evaluation of traditional theory ,and permit an evaluation of existing practices that do not correspond to traditional theory.

- This theory attempts to explain current accounting practices and predict how accountants would react to certain situations , Or how accountants would report specific events .

- These theories related to the structure of data collection process and financial reporting.

slide6

Interpretational (semantical) theories

  • These theories concentrate on the relation between a phenomenon (object or event) and the term or symbol representing it.
  • Because different researchers attach different meaning to the terms and concepts depending on their perception of “users” and “environment”. For examples: intangible, income ,assets value. - even applying (GAAP)-
slide7

Interpretational (semantical) theories

  • The accounting theory aims at giving meaningful interpretations to these concept. It also evaluates alternatives accounting procedures in terms of these interpretations.
  • Thus , the role of theories that emphasize interpretation is to find ways to improve the ability of accounting information to be interpreted in terms of human observation and experience.
slide8

Behavioral (pragmatic) theories

  • These theories emphasize the behavioral or decision-oriented effects of accounting reports and statement .
  • As we know the object of accounting aims to provide information to interested users.
  • So these theories attempt to seek answers to the basic question :
slide9

Behavioral (pragmatic) theories

1. Who are the users of published financial statements.

2. What is the type of the specific information wanted by the several user group.

3. Will general purpose financial statements meet the needs of all types of users.

slide10

Foundation of Accounting Theories

  • The theoretical foundation of accounting theory can be discussed from two sides:

1.Nature of accounting theory.

2.Roots of accounting theory.

slide11

1.Nature of accounting theory

-“Accounting is what accountant do ,therefore, a theory of accounting my be extracted from the practices of accountants.

- No generally accepted theory of accounting, but there are a number of accounting theories has made by (FASB) to formulate a comprehensive theory of accounting .This is due to the difference in perception of “users” and “environment”.

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1.Nature of accounting theory

  • Descriptive (positive) Theory: a theory which attempts to explain how financial information is collected ,analyzed , and communicated.
  • Perspective (normative) Theory: a theory which attempts to state what financial information should be collected ,analyzed , and communicated.