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Mutiara Inas Sari Nadia Citranti Julita Rachmadewi

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Pragmatic theories
Descriptive pragmatic approach:
○ based on observed behaviour of

accountants ○ theory developed from how accountants act in certain situations ○ tested by observing whether accountants do act in the way the theory suggests ○ is an inductive approach

Pragmatic theories  Criticisms of descriptive pragmatic approach:  does not consider the quality of an accountant’s action  does not provide for accounting practices to be challenged  focuses on accountants’ behaviour not on measuring the attributes of the firm 4 .

Pragmatic theories Psychological pragmatic approach: ○ theory depends on observations of the reactions of users to the accountants’ outputs ○ a reaction is taken as evidence that the outputs are useful and contain relevant information 5 .

Pragmatic theories  Criticisms of the psychological pragmatic approach:  some users may react in an illogical manner  some users might have a preconditioned response  some users may not react when they should  Theories are therefore tested using large samples of people 6 .

Syntactic and semantic theories  Semantic inputs are the transactions and exchanges recorded in vouchers. journals and ledgers • The inputs are then manipulated on the basis of the premises and assumptions of historical cost accounting 7 .

different types of monetary measures are added together 8 .g.Syntactic and semantic theories  Criticised because there is no independent empirical verification of the calculated outputs  The outputs may be criticised for poor syntax inaccurate e.

transactions or values) 9 .Syntactic and semantic theories  The outputs may be syntactically accurate but nevertheless be valueless due to a lack of semantic accuracy (a lack of correspondence with real-world events.

Syntactic and semantic theories Historic cost accounting may produce ‘accurate’ outputs but which nevertheless have little or no utility  That is. they are not useful for economic decision making except to verify accounting entries  10 .

Normative theories  1950s and 1960s ‘golden age’    policy recommendations what should be concentrated on deriving: ○ true income (profit) ○ practices that enhance decisionusefulness  based on analytic and empirical propositions Financial statements should mean what they say 11 .

Normative theories  True income:  a single measure for assets  a unique and correct profit figure 12 .

Normative theories  Decision usefulness:  the basic objective of accounting is to aid the decision-making process of certain ‘users’ of accounting reports by providing useful accounting data 13 .

Normative theories The decision process Accounting system of company X Prediction model of user Decision model of user 14 .

Positive theories • Expanded during the 1970s • Based on ‘experiences’ or ‘facts’ of the real world • Explain the reasons for current practice • Predict the role of accounting information in decision-making 15 .

Positive theories  The main difference between normative and positive theories is that  normative theories are prescriptive  positive theories are descriptive. explanatory or predictive 16 .


and financial events which are in effective and efficient manner and in the form of monetary unit and interpret the result of the process. . transaction reviewing. classifying.AICPA Terminology Accounting : art of recording.

.Accounting as Ideology Accounting : viewed as ideology phenomenon to support and to legitimate social structure. and political nowadays. economy. Karl Marx said that accounting shaped social relationships becoming productive effort.

It can be a way to communicate information about business. Grammar language refers to set of general procedures used and followed in making all of the financial data for business needs. .Accounting as Language Accounting : already viewed as business language.

.Accounting as Record of Past Events Generally accounting is viewed as a presentation way of company history and transaction done with other parties.

Accounting as Current Economic Reality Main argument supporting this perspective is that whether statement financial position or income statement has to be reported based on estimation that depict current economic reality rather than historical cost. .

and transmitting the results. manipulating reporting system signal. decoding. And also it could be defined as process of encoding some of observation into information system language. communication channel. and receivers (external users) .Accounting as Information System This assumes accounting as a process correlating information source or transmitter. .

Accounting as Commodity Commodity here is defined as accounting output in the form of information needed on the process of decision-making .

Accounting as Responsibility This elaborates that source of wealth which is managed can be traced in order to be media to take the responsibility of company or institute management. .

It does not use for explaining and predicting certain economic / social variables but for control those variables to fix economic status because of the practitioner’s social status.Accounting as Technology Bambang Sudibyo (1987) said that accounting is software technology. .


What is a theory? Hendriksen’s definition: …the coherent set of hypothetical. 28 . conceptual and pragmatic principles forming the general framework of reference for a field of inquiry.

29 .What is an accounting theory? Hendriksen’s definition: …logical reasoning in the form of a set of broad principles that ○ provide a general framework of reference by which accounting practice can be evaluated and ○ guide the development of new practices and procedures.

 Whether a theory is accepted depends on how:  well it explains and predicts reality  well it is constructed both theoretically and empirically  acceptable its implications are 30 .