How do positive and normative theories differ

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Reference no: EM132879786

1. Researchers who develop positive theories and researchers who develop normative theories often do not share the same views about the roles of their respective approaches to theory construction.
(a) How do positive and normative theories differ?
(b) Can positive theories assist normative theories, or vice versa? If yes, give an example. If not, why not?

2. Classify the following hypotheses according to whether they are conclusions of positive or normative theories. Explain your answers.
(a) Historical cost accounting should be replaced by a market value system.
(b) Historical cost accounting provides information used by creditors.
(c) Historical cost accounting is used by many managers to allocate costs in determining divisional performance.

3. Give an example of an accounting convention usually adopted in historical costaccounting. Conventions govern the way accounting is practised, and conventions are, by definition, known from practice.
(a) What theoretical approach is used to derive conventions?
(b) What does your answer to (a) imply about the potential for accounting
theories based on conventions to be innovative in providing useful
information?

4. What type of a theory is historical cost? How has it been derived? Do you have any criticisms of historical cost accounting?

5. How do you think massive amounts of data now available from information technologies will affect
(a) the development of accounting theories
(b) the testing of accounting theories

6. One type of theory construction involves observing the practices and techniques of working accountants and then teaching those practices and techniques to successive accountants.

(a) What type of theory construction is this?

(b) What are the advantages of this approach compared with a decision-usefulness approach to theory construction?

(d) Do you believe that this is a good approach to developing a theory of accounting? Why or why not?

Reference no: EM132879786

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