chapter 1

The statement that is not descriptive of positive theories is,

The ultimate objective of international accounting standards is to make all countries use the same standards so that there are no differences in reported information across international reporting boundaries.

The statement that best describes the interaction of academic and professional research interests with respect to accounting theory, is:

The statement that best defines what is meant by a theory is:

As a result of accounting prescription being developed in a haphazard way there are follow-on inconsistencies in practice.

The 'debt hypothesis' predicts that the larger the firm's debt to equity ratio, the more likely it is that the firm's manager will select accounting procedures that shift reported profits from future periods to current periods - this is to reduce the likelihood of the firm technically breaching its debt covenants. The theory underlying this hypothesis would be a positive theory.

The rapid increase in demand for both management accounting and financial accounting information in the 1800s can be explained by:

Which of these is an era of accounting theory development during which the emphasis was on providing an overall framework to explain and develop accounting practice by using the empirical analysis method?

Select the pair of periods of accounting theoretical development that are based on a similar approach.

An example of a positive accounting theory is the bonus plan hypothesis. This predicts that managers who are not remunerated via bonus plans use profit-increasing accounting methods more than managers who are remunerated via bonus plan.

Which of these is one of the two main factors that prompted the demise of the normative period of accounting research?

While the accounting profession has sought to use accounting theories to unify accounting practice and make it more useful, academics use accounting theories to understand the role and impact of accounting information. Therefore, academic research on accounting is not useful for professional practice.

During the normative period of accounting theory development, theorists were concerned with explaining and understanding current accounting practice.

Behavioural accounting research is concerned with the broader sociological implications of accounting numbers. As such it is mainly concerned with the reactions of which of the following groups to accounting numbers?

An example of an inconsistency in accounting practice is for a company to depreciate some of its assets using the straight-line method and some using the reducing-balance method.

The period 1800 - 1955 has been labelled the empirical period in accounting development.

Which of the following is not regarded as a period of accounting theory development?

In which of the following situations would you probably not apply a behavioural theory if you wanted to undertake accounting research?

The major focus of the normative accounting theories during the period 1956 - 1970 was:

The two groups that dominated the normative period of accounting theory development were:

Which of the following arguments are reasons why normative theories cannot be empirically tested?
i. It is impossible to demonstrate empirically what ought to be
ii. Normative theories are based on value judgements
iii. There is no access to empirical data sets

The normative period of accounting theory ended because empirical testing proved the theories developed during this period to be false.

The main purpose of accounting theory is to prescribe accounting rules for practitioners.

The development of a conceptual framework has solved the problem of inconsistency in the application of accounting in practice.

Which of these would be an example of normative research (research based upon a normative theory)?

Behavioural research, which is concerned with the broader sociological implications of accounting numbers and the associated actions of 'key players' as they react to accounting information, was first used in an accounting context in the 1980s.

Which of these characteristics is the least important for an accounting theory to be considered acceptable?

No systemic theory of accounting was devised from the time of Pacioli in the 15th century until the opening of the 19th century.