Positive Accounting Theory

Comp are and contrast normative and positive chronicle approaches: comment of PAT: Watts and Zimmerman (1986) defined Pat as a speculation that seeks to explain and predicts particular phenomenon. It is concerned with explaining business relationship system practice. The three radical hypotheses as outlined by Watts and Zimmerman (1978) underlying PAT are: 1. Bonus plan meditation: The bonus plan guess is that managers of firms with bonus plans are more likely to use accounting methods that increase current period reported income. Such pickax presumably increase the present value of bonuses if the compensation mission of the board of directors does not adjust to the method chosen 2. Debt/ faithfulness hypothesis: The debt/equity hypothesis predicts that the higher the firms debt/equity ratio, the more likely that the managers use accounting methods that increase income. 3. governmental cost hypothesis: The political cost hypothesis predicts that vauntingly firms rather than small firms are more likely to use accounting choices that reduce reported profits. Size is a proxy shifting for political attention. THE NATURE OF POSITIVE ACCOUNTING supposition VS. NORMATIVEACCOUNTING THEORY: 1.

POSITIVE ACCOUNTING THEORY The basic idea of positive accounting system (PAT) is adopted from the Pop Suwaldiman 48 SINERGI Vol. 6 no 1, 2003 per idea about what is theory in science (Boland & Gordon, 1982, p. 145). The component part of theory is to explain and predict about a palm or phenomena that is being observed. Therefore a theory is descriptive and explanative but not normative. The theory is not to conduct nor exact the phenomena to be in such a way. A theory is long life true since there is not a new theory that proves or refutes that the old theory is fail, so that, a theory cannot be proved as a truth but it is possible to be proved as a false (refutable). Furthermore, the function of a theory is to final result what is and why not what should be nor how to do. Positive accounting theory... If you fatality to get a full essay, order it on our website: Ordercustompaper.com

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