Exam 1: Introduction

An example of an inconsistency in accounting practice is for a company to depreciate some of its assets using the straight-line method and some using the reducing-balance method.

The main purpose of accounting theory is to prescribe accounting rules for practitioners.

While the accounting profession has sought to use accounting theories to unify accounting practice and make it more useful,academics use accounting theories to understand the role and impact of accounting information.Therefore,academic research on accounting is not useful for professional practice.

No systemic theory of accounting was devised from the time of Pacioli in the 15^th century until the opening of the 19^th century.

Which of the following is not regarded as a period of accounting theory development?

Behavioural accounting research is concerned with the broader sociological implications of accounting numbers.As such it is mainly concerned with the reactions of which of the following groups to accounting numbers?

As a result of accounting prescription being developed in a haphazard way there are follow-on inconsistencies in practice.

An example of a positive accounting theory is the bonus plan hypothesis.This predicts that managers who are not remunerated via bonus plans use profit-increasing accounting methods more than managers who are remunerated via bonus plan.

The 'debt hypothesis' predicts that the larger the firm's debt to equity ratio,the more likely it is that the firm's manager will select accounting procedures that shift reported profits from future periods to current periods - this is to reduce the likelihood of the firm technically breaching its debt covenants.The theory underlying this hypothesis would be a positive theory.

Which of the following arguments are reasons why normative theories cannot be empirically tested? i.It is impossible to demonstrate empirically what ought to be ii.Normative theories are based on value judgements iii.There is no access to empirical data sets

The current Australian conceptual framework consists of SAC 1,SAC 2,SAC 3,and SAC 4.

The statement that is not descriptive of positive theories is,

Which of these would be an example of normative research (research based upon a normative theory)?

Compare and contrast the normative approach to accounting theory with the positive approach.

The normative period of accounting theory ended because empirical testing proved the theories developed during this period to be false.