Accounting theory and accounting research

Accounting Theory and Accounting Research

Nyoman Ardiantha Putera R.M./344132Muhammad Heickal Pradinanta/350168

Scientific Method

• A body of technique for investigating Phenomena, acquiring new knowledge, or correcting and integrating previous knowledge. A theory, that must contain a basic set of premises (assumptions or postuiates)

Research Approaches

• Deductive Reasoning: Logical reasoning is used.

eg: Premise 1= Snakes are reptilesPremise 2= Reptiles are cold-

blooded Conclusion= Snakes are cold-

blooded

• Inductive Reasoning: analyzing the logic of a set of sentences not simply by its internal logic.

Eg: The cost of goods was $2.00. The cost of labor was $1.00. The sales price is $6.00 per unit; so the item always provides good profit.

Normative (prescriptive) Theory• Employ a value judgement, containing

at least one premise saying that this is the way things should be

eg: Conceptual frameworkDeductive system are often normative.

Descriptive Theory• Attempt to find relationships that

actually exist. Inductive approaches usually attempt to be descriptive

Global and Particularistic

Theories• Global (macro) theories

Deductive reasoning

• Particularistic (micro) theories Inductive reasoning

Directions in Accounting Research1. Decision-model approach2. Capital market research3. Behavioral research4. Agency theory5. Information economics6. Critical accounting

The Decision-Model Approach

• Asks what information is needed for making decisions

• Does not ask what information users want• Orientation is normative and deductiveThe main decisions embraced by the decision-model approach:1. Enabling the user to better predict future cash flows2. Analyzing the efficiency and effectiveness of

management

Capital Market Research

• Efficient-Markets Hypothesis (EMH) : market prices reflect fully all publicly available information

• EMH has significant implications for accounting

• Difficult

Behavioral Research• Focus on how users of accounting

information make decisions and what information they need

• This approach is descriptive or positiveDivided into 2 types:1. Behavioral2. experimental

Agency Theory• Deductive/Inductive• Enterprise as the locus or intersection

point for contractual-relationships (eg: management, owners, creditors, and government).• Concerned with various cost of

monitoring and enforcing relations among the group.

Information Economics

• Analytical/deductive• To determine how contractual

arrangement incentives and risk sharing can be negotiated

Critical Accounting• Concerned with the active social role of

accountant• An Amalgamation of public interest

accounting and social accounting

THANK YOU!