Podcast
Questions and Answers
Which of the following is true about theories in general? (Select all that apply)
Which of the following is true about theories in general? (Select all that apply)
According to Thouless (1974), the 'tricks' some writers often use to distract readers from limitations in the logic of an argument or theory are: (Select all that apply)
According to Thouless (1974), the 'tricks' some writers often use to distract readers from limitations in the logic of an argument or theory are: (Select all that apply)
Normative accounting theories and research seek to: (Select all that apply)
Normative accounting theories and research seek to: (Select all that apply)
A theory that predicts that, if certain conditions are met then particular accounting practices will be observed, is an example of:
A theory that predicts that, if certain conditions are met then particular accounting practices will be observed, is an example of:
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Which of the following is not assumed in Positive Accounting Theory?
Which of the following is not assumed in Positive Accounting Theory?
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A theory (or model) that states that the most useful information for economic decision making is the current cash equivalents, as measured by the current net market values, is:
A theory (or model) that states that the most useful information for economic decision making is the current cash equivalents, as measured by the current net market values, is:
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One criticism of Positive Accounting Theory is that it tells us nothing about:
One criticism of Positive Accounting Theory is that it tells us nothing about:
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Which of the following is not an example of a normative accounting theory or research?
Which of the following is not an example of a normative accounting theory or research?
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In evaluating theories of accounting, which of the following is not true?
In evaluating theories of accounting, which of the following is not true?
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Which of the following statements is true about proving a theory?
Which of the following statements is true about proving a theory?
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Which of the following statements aligns with the views of 'Falsificationists', such as Popper and others?
Which of the following statements aligns with the views of 'Falsificationists', such as Popper and others?
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Which of the following statements best explains the role of logic in a theoretical argument?
Which of the following statements best explains the role of logic in a theoretical argument?
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The failure of a particular study to support a theory:
The failure of a particular study to support a theory:
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Study Notes
Theories in General
- Theories consist of coherent ideas and statements aimed at explaining or guiding understanding of specific phenomena.
- Empirical basis is important for theories to accurately describe reality rather than prescribe ideals.
- Inductive reasoning is a key element to formulating theories that generalize or predict outcomes.
Tricks Used in Arguments
- Use of emotionally charged language can distract readers from argument flaws.
- Sophisticated formulas can evade logical refutation.
- Changing the meaning of key terms during an argument can mislead readers.
Normative Accounting Theories
- Aim to prescribe practices not necessarily driven by existing standards.
- Seek to describe what constitutes normal or widely accepted practices.
Positive vs. Normative Accounting Theory
- Positive Accounting Theory predicts observed accounting practices under specific conditions.
- Normative Accounting Theory focuses on what accounting practices should be, rather than what is observed.
Assumptions in Positive Accounting Theory
- Assumes individuals, including managers, act rationally and are motivated by self-interest.
- Suggests that managers aim to maximize firm wealth.
- Implies that managers are discerning in their accounting method selections.
Current Cash Equivalents Theory
- Current Price Accounting highlights the importance of cash equivalents for economic decisions.
- Emphasizes measurement by current net market values.
Critique of Positive Accounting Theory
- Fails to address the efficiency or fairness of accounting methods.
- Lacks guidance on selecting the most appropriate methods for firms.
Normative Accounting Theories Examples
- Conceptual frameworks and capital markets research do not fall under normative theories.
- Critical perspectives and true income theories illustrate normative research.
Evaluating Accounting Theories
- Theories emerge from various paradigms, each providing unique insights.
- Positive Accounting Theory claims to be value-free, yet choosing a theory involves value judgments.
- All accounting theories are abstractions; their validity depends on alignment with personal perceptions of reality.
Proving Theories
- Positive Accounting Theory seeks reliable predictions, but does not need to hold true in every case.
- Theories should be tested, though exceptions may exist.
Views of Falsificationists
- Hypotheses arise from educated guesses influenced by existing theories.
- Theories are seen as potentially false until empirically validated.
Role of Logic in Theoretical Arguments
- A conclusion is only as valid as the truth of its underlying premises.
- Logical coherence is crucial, though must also correspond to real-world observations.
Impact of Negative Study Results
- Negative findings do not automatically invalidate a theory; persistent lack of support can threaten its credibility.
- Flaws in study design may also be a factor in unsuccessful validation of the theory.
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Description
Test your understanding of financial accounting theories with this multiple-choice quiz. Explore foundational concepts and definitions, and evaluate your comprehension of key principles in Chapter 1. Perfect for students beginning their journey in accounting theory.
