Introduction

Accounting Theory

Arwina Karmudiandri
 Overview of
Accounting Theory
Why do we need theory?
1. Demand to fil a gap knowledge
2. Reduce uncertainties about current and future
value
3. Questions about measurement and implication
4. Impact of different implementation of
measurement system on the economy or market
or each on the individual stakeholder
what is theory?
The terms theory can be used different ways
1. Theory is a deductive system of statementsof decreasing
generality that arise from an agreed or hypothetical
premise
2. Set of ideas used to explain real - world observation
 1. The coherent set of hypothetical, conceptual and pragmatic
principles forming the general framework of refferences for a
field of inquiry
2. Logical reasoning in the form of a set of broad principles that :
a. Provide a general framework of reference by which
ac counting practice can be evaluated
b. Guide the development of new practices and procedures

Hendriksen
Theory is accepted depends on:
Insights 1
How well is explained and predict reality

Insights 2
How well it is constructed both theoretically and empirically

Insights 3
How applicable are the implications of the theory ito a body of
scientist, professionals and society as a whole
 Accounting Theory is not simply an abstract concept
Pacioli focus on documenting
Accounting theory is a modern the process involed and not
concept about explaining the underlying
basis for this method of
recording

CHAMBERS"
Accounting has frequently been described as
Accounting first developed as a a body of practices which have been
set of tools to record activities developed in response to practical needs
or transactions rather than by deliberate and systematic
thinking
Pre Theory

1494 1800 1930

FRA PACIOLI FORMALISATION Growth of the business in
US and United Kingdom
 PRAGMATIC ACCOUNTING
Starting from the Great Wall crash in 1929. Led to
creation of Securities and Exchange Commission
(SEC) in the early 1930s. SEC had a brief and
legislative power to improve financial regulation and
reporting.

Several notable accounting publication and birth

professionally based conceptual theory:
1. 1936 American Accounting Association (AAA)
2. 1938 American Institute of Certified Practising (AICPA)
Normative Accounting
Prescribes How Accounting should be
practiced, they are based on opinion of
what the accountant should report and
the best way to do that.
 Positive Accounting
1. The Dissatisfaction of normative accounting
2. Positive theory is hardly 'new'
3. The objective of positive accounting is to explain and
predict accounting practice
4. Bonus plan hypothesis
Thank You for
listening!