Understanding Accounting Theories

Which of the following is true about theories in general?

• Theories can include any coherent set of ideas or statements to explain, or provide guidance in respect of, certain phenomena.

• Theories must be empirically based to describe what is, rather than what should be.

• Theories must be based on inductive reasoning to provide a generalisation or prediction.

• All of the given options are correct.

Normative accounting theories and research seek to:

• Explain and predict particular phenomena based on observation

• Prescribe particular approaches not driven by existing practices

• Describe what is normal, or generally accepted, practice

• All of the given options are correct.

A theory that predicts that, if certain conditions are met then particular accounting practices will be observed, is an example of:

• Positive Accounting Theory

• Negative Accounting Theory

• Normative Accounting Theory

• Descriptive Accounting Theory

Which of the following is not an example of a normative accounting theory or research?

• Conceptual frameworks of accounting

• Critical perspectives of accounting practice

• Fair value accounting

• Capital markets-based (security price) research

Which of the following is an example of a dominant paradigm in accounting prior to 1960?

• Fair value accounting

• Conceptual framework of accounting

• Historical cost accounting

• Continuously contemporary accounting