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, most commonly found in a company’s business or marketing plan, takes a subjective approach. Based on abstract principles, it endeavours to characterise what the financial future of a firm should look like.
Detailed explanation-2: -Normative accounting theories and research seek to: A Explain and predict particular phenomena based on observation.
Detailed explanation-3: -The answer is c); Capital Markets-based (security price) research.
Detailed explanation-4: -Why would it not be appropriate to reject a normative theory of accounting because its prescriptions could not be confirmed through empirical observation? Firstly, “because normative theory contains a subjective value judgment, this value judgment can not be proved or falsified”.