Chapter 1 Course Notes
Financial Accounting Theory and Analysis 10e
Chapter 1 - The Development of Accounting Theory
What is Theory?
Webster defines theory as “Systematically organized knowledge, applicable in a relatively wide variety of circumstances; a system of assumptions, accepted principles and rules of procedure to analyze, predict or otherwise explain the nature of behavior of a specified set of phenomena.” Why is the development of a general theory of accounting important?
The development of a general theory of accounting is because of the role accounting plays in our economic society. We live in a capitalistic society which is characterized by a self-regulated market that operates through the forces of supply and demand. What is the relationship of accounting research to accounting theory?
The goal of accounting theory is to provide a set of principles and relationships that explains observed practices and predicts unobserved practices. That is, accounting theory should be able to explain why companies elect certain accounting methods over others and should enable users to predict the attributes of firms that elect various accounting methods. And as in other disciplines, accounting theory should also be verifiable through accounting research.
Accounting research is needed to attain a more general theory of accounting, and in this regard the various theories of accounting that have been posited must be subjected to verification.
The Early History of Accounting
Zenon Papyri * Accounting records have been found to date back several thousand years in various parts of the world. Discovered in 1915, the Zenon Papyri contained information Apollonius private estate for a period of about 30 years concerning construction projects, agricultural activities, and business operations during the 3rd century B.C. According to Hain, this “surprisingly elaborate accounting system” was used in Greece since the fi fth century B.C. “Zenon’s accounting system contained
Chapter 1 - The Development of Accounting Theory
What is Theory?
Webster defines theory as “Systematically organized knowledge, applicable in a relatively wide variety of circumstances; a system of assumptions, accepted principles and rules of procedure to analyze, predict or otherwise explain the nature of behavior of a specified set of phenomena.” Why is the development of a general theory of accounting important?
The development of a general theory of accounting is because of the role accounting plays in our economic society. We live in a capitalistic society which is characterized by a self-regulated market that operates through the forces of supply and demand. What is the relationship of accounting research to accounting theory?
The goal of accounting theory is to provide a set of principles and relationships that explains observed practices and predicts unobserved practices. That is, accounting theory should be able to explain why companies elect certain accounting methods over others and should enable users to predict the attributes of firms that elect various accounting methods. And as in other disciplines, accounting theory should also be verifiable through accounting research.
Accounting research is needed to attain a more general theory of accounting, and in this regard the various theories of accounting that have been posited must be subjected to verification.
The Early History of Accounting
Zenon Papyri * Accounting records have been found to date back several thousand years in various parts of the world. Discovered in 1915, the Zenon Papyri contained information Apollonius private estate for a period of about 30 years concerning construction projects, agricultural activities, and business operations during the 3rd century B.C. According to Hain, this “surprisingly elaborate accounting system” was used in Greece since the fi fth century B.C. “Zenon’s accounting system contained