BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Explain and predict particular phenomena based on observation
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Prescribe particular approaches not driven by existing practices
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Describe what is normal, or generally accepted, practice
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All of the given options are correct
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Detailed explanation-1: -Normative Accounting Theory is an explanation or reasoning to justify the feasibility of an accounting treatment that is most in line with the stated objectives. Better explain accounting practices that should apply (it should be) and value is used as the main target.
Detailed explanation-2: -Normative accounting theories and research seek to: A Explain and predict particular phenomena based on observation.
Detailed explanation-3: -Accounting theory is defined as a cohesive set of conceptual, hypothetical and pragmatic proposition explaining and guiding the accountant’s actions in identifying, measuring and communicating economic information to users of financial statement, (American Accounting Association (A.A.A).
Detailed explanation-4: -Positive accounting is very practical, and based on what’s actually happening. Normative is more theoretical, ensuring that, as day-to-day practices evolve, they don’t diverge from appropriate economic concepts. The result is the accounting system we have today, both practical and principled.