Presentation on

´Introduction to Accounting Theoryµ

Topics ³Accounting Theory Approach´ .

Mydul Islam Sadia Afrin Imtiaz Uddin Ahmed Mahnaz Faridy Jabin Asaduzzaman 02707632 02707687 02707766 02707835 02708027 . Zobaer Lecturer.Prepared For: Moksud Md. Department of Business Administration Stamford University Bangladesh Prepared By: MD.

.Aim The aim of this presentation is to enrich you about the Approaches Of Accounting Theory.

Ethical Approach 6. Sociological Approach 7. The Eclectic Approach 1.³Approaches´ # Traditional Approaches: Pragmatic Approach 2. Economic Approach 8. . Authoritarian Approach 3. Deductive Approach 4. Inductive Approach 5.

2. 4. The Events Approach The Behavioral Approach Human Information Processing Approach The Predictive Approach The Classical Approach The Evolutionary Approach The Processual Approach . # Other Approaches: 1. 3.# New Approaches: 1. 2. 3.

consists of issuing pronouncements for the regulation of accounting practices. which is employed primarily by professional organizations. Approaches: Pragmatic Approach: The pragmatic approach consists of the construction of a theory characterized by its conformity to real world practices that is useful in terms of suggesting practical solutions.# Traditional 1. . Authoritarian Approach: The authoritarian approach to the formulation of an accounting theory. 2.

. Ethical Approach: The basic core of the ethical approach consists of the concepts of fairness. justice. Inductive Approach: The inductive approach begins with observation about the financial information of business enterprises and proceeds to construct generalizations and principles of accounting from these observations on the basis of recurring relationship. equity and truth. Deductive Approach: The deductive approach begins with the basic accounting propositions or premises and proceeds to derive by logical means accounting principals that serve as guides and bases for the development of accounting techniques. Scott equates ³Justice´ with equitable treatment of all interested parties. ³truth´ with true and accurate accounting statements without misrepresentation and ³fairness´ with fair. 4. 5.3. unbiased and impartial presentation.

or a combination of approach rather than only one of the approaches presented here. the choice of different accounting techniques depends on their impact on the national economic good. Accounting to the sociology approach a given accounting principle or technique is evaluated for acceptance on the basis of its reporting effects on all groups in society. Sociological Approach: The sociological approach to the formulation of an accounting theory emphasizes the social effects of accounting techniques. Accounting to the approach. the economic approach focuses on a concept of ³general economic welfare´. 7. Economic Approach: While the ethical approach focuses on a concept of ³fairness´ and sociological approach on a co concept of ³social welfare´. 8.6. . The Eclectic Approach: In general the formulation of an accounting theory and the development of accounting principles have followed an eclectic approach.

the balance sheet is perceived as an indicator of the financial position of the firm at a given point of time. the behavior of the users of accounting information is an important consideration in the selecting of an accounting technique.# New Approaches: 1. The behavioral approach to the formulation of accounting theory emphasizes the relevance to decisions making of the information communicated. In the events approach. In the value approach.communicationcommunicated-a communication-decision orientation and on the individual and group behavior caused by the communication of the information ±a decision-maker orientation. 2. The Behavioral Approach: The behavioral approach to the Approach: formulation of an accounting theory is concerned with human behavior as it relates to accounting information and problem. Only one member favored the events approach. In this approach. the balance sheet is perceived as an indirect communication of all accounting events relevant to the firm since is inception. decision- . The majority of the committee members favored the value approach to accounting. The Events Approach: The event approach was first explicitly stated Approach: after a divergence of opinion among the members of the committee of the American Accounting Association.

4. they must provide or permit predictions of future objects or events. The Predictive Approach: Predictive value is an Approach: ingredient of relevance. Human Information Processing Approach: Interest Approach: in the human information processing approach arose from a desire to improve both the information set presented to users of financial data and the ability of users to use the information. . it follows that if accounting data are to be relevant. they must provide into the decisions model of the investors.3. If accounting data are to be relevant for making decision by investors. And since only expectations of future objects and events are relevant for these decision models. a primary quality financial reporting.

3. They expect markets to secure profit maximization and managers to be rational optimizers in a law of the jungle view of the business world where only the best performers survive.# Other Approaches: 1. The Evolutionary Approach: Proponents of the evolutionary approach see the attainment of a strategic framework as a dangerous delusion. and though they share some common thinking with the evolutionists they ate far less confident about the environments ability to foster strategy selection. It is a theory which states that management best serves the interest of all investors by undertaking all productive investment opportunities that yield a return greater than that available on the capital markets. . The Classical Approach: Classicists see profitability as the key goal Approach: of any business and rational planning as the means to achieve it. borrow and lend on the capital market to produce the cash flows that meet their own personal individual needs. in turn. 2. The Processual Approach: Most processualists see the classicists as naive idealists. There is much less confidence ten senior management¶s ability to plan and act in a rational manner. Shareholders.

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