Positive vs Normative Accounting Theory Essay Sample.
Positive Accounting Research (PAR) refers to a particular mode of empirical research designed to explain accounting practices of companies. The primary objective of PAR is the development of a Positive Accounting Theory (PAT), which can explain as well as predict accounting practices in contrast to the Normative Accounting Theories, which are prescriptive in nature and which were a dominant.
Positive accounting theory offers a means of focusing academic attention on the study of actuarial practice as it is, rather than normative models of how it should be. Since there does not appear to be one superior method over another to test whether positive or normative accounting theory is better, a combination of the two must be implemented. This way the stronger aspects of both theories.
Positive and Normative Accounting Combined Both practical and normative accounting are influential theories, but which of the two is preferred and can or should they be used together? Today, although a business may opt for one theory over the other, it’s common place for a company to use a combination of practical and normative; in many cases, the theories complement each other.
According to him the theory of the entire positive accounting is done on a positive research based on both the accounting and economics aspects. Even as per the research was done by the Watts and Zimmerman concluded that the accounting theory could have become better by adapting some wider concepts of accounting. Despite, of the various predictions done by the experts, the income of the firm.
The efficiency perspective is taken into Positive Accounting theory as researchers explain how various managers choose accounting methods that show a true representation of the firm's performance. Within this perspective, (3) it is stated by numerous authors that accounting practices adopted by firms are often explained on the basis showing the true image of financial performance of the firm.
This paper examines the development of positive accounting theory (PAT) and compares it with three standard accounts of science: Popper (1959), Kuhn (1996), and Lakatos (1970).
The Definition of Positive Accounting Theory The positive theory is a theory that seeks to explain and predict particular phenomena. According to (Watts and Zimmerman, 1990, p. 148) the use of the term positive research was popularized in economists and was used to distinguish research which sought to explain and predict (which is positive research), from research which aimed to provide.