ACCOUNTING THEORY Hashemite University Dr Husam Al-Khadash 1

CHAPTER 1 THE DEVELOPMENT OF ACCOUNTING THEORY 2

Introduction What is theory? What is the relationship of accounting research to accounting theory? 3

Accounting Theory Defined

Accounting theory is somewhat like a cloud, i.e. not well-defined. Accounting Theory Structure of Accounting Theory Informal Approach

Accounting Theory and the need for accounting framework Accounting theory framework Accounting research Accounting practice 6 STANDARDS PRINCIPLES ASSUMPTIONS © 2010 Dr Husam Al-Khadash-

Accounting in practice is Communication Measurement 7 Recognition © 2010 Dr Husam Al-Khadash-

Research Methodology Deductive approach Inductive approach Scientific Method 8

Deductive Approach Begins with the establishment of objectives Next definitions and assumptions are stated A logical structure for accomplishing the objectives based on the definitions and assumptions is developed Attempts to “theorize are generally based on the deductive approach 9

Inductive Approach Making observations and drawing conclusions Generalizations are made about the universe based upon limited observations 10

The Scientific Method Involves the following steps: –Identify and state the problem to be studied –State the hypotheses to be tested –Collect data necessary to test the hypotheses –Analyze and evaluate data –Draw a tentative conclusion –Most accounting research found in academic journals uses the scientific method 11