Accounting Theory and Practice
Positive Accounting Theory
Positive Accounting Theory has upgraded the comprehension of different accounting phenomena and issues. For instance, it has yielded critical experiences into the linkage between accounting numbers and stock returns and administration’s monetary reporting incentives. Notwithstanding this present, its commitment to accounting practice has been exceptionally limited. Further, brings about PAT have proposed circumstances in which administration is liable to oversee profit. For instance, income are overseen when administration’s extra relies on upon reported profit , when firms are going to disregard obligation pledges, at the point when current year’s profit is liable to miss the mark concerning certain benchmarks (e.g., last years income, keeping away from losses, and securities examiners’ estimates;, when organizations issue offers, when there are changes in administration. Inspecting measures require the auditor to recognize and survey risks of material errors in financial statements (Dunleavy, 2014). These discoveries may offer assistance the auditor distinguish circumstances of conceivable profit control.
Positive accounting theory tries to disclose why firms keep on utilizing recorded expense accounting and why certain organizations switch between quantities of accounting methods.