Positive vs Normative Accounting Theory
Essay Guideline
(brief simple short essay - example only to assist with planning)
TOPIC: Discuss positive accounting theory and contrast it with normative accounting theory. Provide examples where appropriate. The purpose of this essay is to provide an overview of positive accounting theory (PAT) and highlight how this theory differs to normative accounting theory. Definitions and assumptions of both theories will be considered and examples of the theories will be provided. In addition specific theories related to PAT namely agency and the efficient market hypothesis will be
Notice how the essay introduction starts with the purpose of the essay and then highlights the direction of the essay.
Remember in your essay you don’t need to include
EVERYTHING only enough to get your message across and answer the question – stick to the word limit
elaborated.
Positive accounting theory is concerned with explaining and predicting current accounting practices (Watts and Zimmerman, 1986). There is a focus on understanding and explaining the techniques and methods that accountants currently use for example why the conventional historic cost accounting system is the primary measurement system applied today.
Unlike normative theory, positive theory is designed to explore current
Notice how each paragraph has one main topic area, new topic areas should mean a new paragraph. Provide in‐text references where appropriate
accounting practice not to prescribe or advise which methods should be used. Normative
accounting
theories
dismiss
conventional
historic
cost
accounting as being meaningless or not decision useful and prescribe the use of more ‘useful’ systems of accounting mostly based on inflation adjustments. One of the issues which became the focus of some
normative theorists is how to derive the ‘true income’ (profit).
Positive accounting theory had its origins in
(brief simple short essay - example only to assist with planning)
TOPIC: Discuss positive accounting theory and contrast it with normative accounting theory. Provide examples where appropriate. The purpose of this essay is to provide an overview of positive accounting theory (PAT) and highlight how this theory differs to normative accounting theory. Definitions and assumptions of both theories will be considered and examples of the theories will be provided. In addition specific theories related to PAT namely agency and the efficient market hypothesis will be
Notice how the essay introduction starts with the purpose of the essay and then highlights the direction of the essay.
Remember in your essay you don’t need to include
EVERYTHING only enough to get your message across and answer the question – stick to the word limit
elaborated.
Positive accounting theory is concerned with explaining and predicting current accounting practices (Watts and Zimmerman, 1986). There is a focus on understanding and explaining the techniques and methods that accountants currently use for example why the conventional historic cost accounting system is the primary measurement system applied today.
Unlike normative theory, positive theory is designed to explore current
Notice how each paragraph has one main topic area, new topic areas should mean a new paragraph. Provide in‐text references where appropriate
accounting practice not to prescribe or advise which methods should be used. Normative
accounting
theories
dismiss
conventional
historic
cost
accounting as being meaningless or not decision useful and prescribe the use of more ‘useful’ systems of accounting mostly based on inflation adjustments. One of the issues which became the focus of some
normative theorists is how to derive the ‘true income’ (profit).
Positive accounting theory had its origins in