Positive Accounting Theory And Normative Accounting Theory

What Is Deference between Positive Accounting Theory and Normative Accounting Theory?

Introduction

The main purpose of the assignment is to bring out the differences on theories that is, positive accounting and normative accounting (Miller, P. and Power, M., 2013). Accounting is the concept of business that gives executive as well as shareholder a consistent scheme so that they can represent the cash of their corporation in a way where it should be apparent, revealing and dependable in the most appropriate way. Both the theories named as Positive and normative accounting is the theories that essentially help in creating scheme for shareholder as well as executive so that they can use this hypothesis in a particular time.

Positive Accounting Theory

As stated by Glover (2014), the theory on positive accounting help in examining the real life occurrence and brings out clear facts about the companies who deal with the accounting treatment for different types of transactions. Positive accounting theory views at the real world that consists of transactions and events where the companies need to keep an account on the ongoing events for gaining insights of information on the economic consequences of the accounting decisions. Furthermore, the theory anticipates through use of knowledge on how business actually takes a look on the transactions and events that happen in the future. The theory is based on facts. Therefore, Positive accounting theory deals with identifying the economic statistics and data that is derived at conclusion based on the anticipated figures (Fernando, S. and Lawrence, S., 2014).

Normative Accounting Theory

As rightly put forward by Deegan (2014), the theory on normative accounting considered as a deductive process that takes place after making the comparison with the positive accounting theory. In that way, the theory starts with the problem recognition and then it goes to specific policies when there need positive start with the application of proper polices and generalization to the higher-level principles. On comparison, it can be stated that normative accounting practices considers as the proper form of value judgment that introduces the subjective morality into accounting practices. It is then when the theory starts executing the process on accounting after deriving at the value based income and bringing out the approaches that are needed by the companies (Deegan, C., 2013).

Difference between positive accounting theory and normative accounting theory

Conclusion

From the above analysis, it is accomplished that both the secretarial theories are significant depending upon the circumstances the business faces. To explain, Positive accounting theory tries in creation good forecast in the real world proceedings as well as translates into exact secretarial dealings. On the other hand, normative theories tend to advise what should be done. Entire assignment evidently defines both the assumption, its benefits that give proper insights of facts that when this hypothesis should be used by executive and shareholder.

Reference List

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Bonin, H., 2013. Generational accounting: theory and application. Springer Science & Business Media.

Deegan, C., 2013. Financial accounting theory. McGraw-Hill Education Australia.

Deegan, C., 2014. An overview of legitimacy theory as applied within the social and environmental accounting literature. Sustainability accounting and accountability, pp.248-272.

Fernando, S. and Lawrence, S., 2014. A theoretical framework for CSR practices: integrating legitimacy theory, stakeholder theory and institutional theory. Journal of Theoretical Accounting Research, 10(1), pp.149-178.

Glover, J., 2014. Have Academic Accountants and Financial Accounting Standard Setters Traded Places?. Accounting, Economics and Law Account. Econ. Law, 4(1), pp.17-26.

Miller, P. and Power, M., 2013. Accounting, organizing, and economizing: Connecting accounting research and organization theory. Academy of Management Annals, 7(1), pp.557-605.