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1a - Introduction To Accounting Theory

This document discusses the definition and development of accounting theory. Accounting theory is defined as the logical reasoning and conceptual framework that underlies accounting rules and standards. It aims to explain current practices and guide future development. The document outlines four periods in the development of accounting theory: pre-theory, general scientific, normative, and positive/specific scientific. It provides context around influential thinkers and factors that drove changes between the periods, with a shift from describing practices to prescribing standards to positive empirical analysis.

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Meivi Ulfa
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121 views

1a - Introduction To Accounting Theory

This document discusses the definition and development of accounting theory. Accounting theory is defined as the logical reasoning and conceptual framework that underlies accounting rules and standards. It aims to explain current practices and guide future development. The document outlines four periods in the development of accounting theory: pre-theory, general scientific, normative, and positive/specific scientific. It provides context around influential thinkers and factors that drove changes between the periods, with a shift from describing practices to prescribing standards to positive empirical analysis.

Uploaded by

Meivi Ulfa
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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INTRODUCTION TO

ACCOUNTING
THEORY
Introduction to Accounting Theory

 What is Accounting Theory


 Accounting Theory & Policy Making
 Periods of Accounting Development
Pengertian Teori

 Sesuatu yang abstrak


 Sesuatu yang ideal
(peraturan/standar/norma)
 Lawan/pasangan sesuatu yang
nyata/praktis
 Penjelasan ilmiah
 Penalaran logis
Theory and Accounting Theory
 Hendriksen (1970)
...the coherent set of hypothetical, conceptual and
pragmatic principles forming the general framework of
reference for a field of inquiry

…logical reasoning in the form of a set of broad


principles that (1) provide a general framework of
reference by which accounting practice can be
evaluated and (2) guide the development of new
practices and procedures
the logical reasoning underlying a statement of a belief
 The theory is accepted depends upon
how well it explain and predicts reality
how well the theory is constructed
how acceptable the implication of the theory
Accounting Theory
 is not divorced from reality
 Its primary purpose is
to explain current accounting practice
to provide the basis for development in such
practice
 Chambers (1963)
Accounting has frequently been
described as a body of practices which
have been developed in response to
practical needs rather than by deliberate
and systematic thinking
Accounting Theory is defined as:
(Wolk, Dodd and Tearney)
 the basic  the reporting of
assumptions accounting and
definitions financial
principles and information
concepts that  applicable to
underlie the rule financial
making by a accounting, not to
legislative body governmental or
managerial
Accounting Theory includes
 Conceptual Frameworks
 Accounting Legislation
 Concepts
 Valuation Models
 Hypotheses and Theories
Accounting Theory & Policy Making

 3 inputs to policy making function


Accounting Theory
Political Factors
Economic Conditions
 Once policy is made
Accounting Practice implements the policy
Users observe effects of implementation
Financial Accounting Environment

Accounting Political Economic


Theory Factors Conditions

Accounting
Policy Making

Accounting
Practice

Users
of Accounting
Data and Reports
Accounting Political Economic
Theory Factors Conditions

Accounting
Policy Making

Accounting Audit
Practice Function

Users
of Accounting
Data and Reports
Period of Accounting Development
(G)
 Pre-theory Period (until 1800)
 General Scientific Period (1800-1955)
 Normative Period (1956-1970)
 Specific Scientific Period/Positive Era
(1970-now)
Periods of Accounting Development
(Wolk, Dood and Tearney)

Pre 1930 Accounting largely unregulated

Formative years, initiated by 1929


1930-46 stock market crash

1946-59 Post-war period

1959-present Modern period


Pre-theory Period
 <1400s
Very little was written about the theory underlying accounting
practice
Developmental period of double-entry system
The primary emphasis was on practices

 1494
Summa de Arithmetica Geometria Proportioni et
Proportionaita (Luca Pacioli)

 Pre-theory Period
Concentrated on refining practices
 1800s
Formalization of existing practice in textbook
and teaching method
Increase the demand for management and
financial accounting information
Rapid expansion in technology
Large-scale separation of ownership from
control of the means of production
 Increase the demand for detailed accounting
information, improved techniques and explanation of
the basis for improvement, such as depreciation
 Growth of business sector and construction of railroad
network in US and UK
 Taxation legislation and birth of corporation led to
increased government legislation regarding reporting
requirement
 Some government and corporate economic policy
decisions were beginning to be based on accounting
number
 Economic theory was progressing
rapidly and was beginning to be linked
to the demands for accounting
information
 Occurring primarily in UK

 1930
Rather ad hoc and ill-defined
General Scientific Period (1800-1955)

 Most theory developments were concerned with


providing explanation of practices
The emphasis was on providing an overall
framework to explain and develop accounting
practice

 Theories were develop on the basis of empirical


analysis and the method adopted in the physical
sciences that relies on real-world observations
rather than solely on logic
 Focused on the existing ‘viewpoint’ of
accounting and promulgated to explain
practice become more detailed and
complex
Normative Period (1956-1970)
 Accounting theorists attempted to
establish ‘norm’ for ‘best accounting
practice’
 Researches were less concern about what
actually happened in practice and more
concern about developing theories which
prescribe what should happen
Appropriate basis for valuation of assets
and owners’ claim, and reference to the
impact of inflation
 The major focus was the impact of
changing price on the value of assets
and the calculation of income
 The consequences of the records levels
of inflation
Two groups:
The critics of historical cost
The conceptual framework proponents
 CF is a structured theory of accounting
To encompass all components of
financial reporting and intended to guide
practice.
Specific Scientific Theory Period/
Positive Era (1970-now)
 Two main factors demise normative period
Unlikelihood of acceptance of any particular
normative theory
○ How accounting should be are based upon a
subjective opinion
○ Opinion to the appropriate goals and methods of
accounting
The availability of financial economic principles
and testing method
 Major criticisms of Normative Theory
NT do not involve hypothesis testing
NT are based on value judgment
 Objective of positive accounting theory is
to ‘explain and predict’ accounting practice.
example: bonus plan hypothesis
 Behavioral research in accounting
 Academic and profession research
Profession has sought the theories to unify
accounting practice and make it more useful
Academic has sought to better understand the
role and impact of accounting information
Accounting Theory
 A number of question from purely technical and
measurement issues through to political and social
issues
 What is income and is it measured?
 How should assets and liabilities be valued in the
balance sheet?
 Should we use buying price, selling price, historical
cost, a general inflation index or cash flows as the
basis for measure performance?
 What a intangible assets and why are some intangible
capitalized in the balance sheet while others are not
Membaca, berpikir, menulis, meringkas, dan bertanya.
Itulah pembelajar sejati
(Suwardjono).

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