Term Paper: Positive Accounting Theory

Term Paper: Positive Accounting Theory
June 8, 2011 Comments Off on Term Paper: Positive Accounting Theory Academic Papers on Business Studies,Sample Academic Papers admin

Sample Term Paper

The positive accounting theory forecasts why managers prefer some accounting principles and methods over others. The selection of these principles and methods is based on either personal benefits or organizational efficiency. When accounting standards are implemented in organizations to complete the process of accounting and prepare financial statements managers have several accounting procedures at their discretion. Examples of these methods include the selection of methods for depreciating plant assets and valuing inventory.

Managers can decide whether to use one method of depreciation or inventory valuation over others during the preparation of financial statements prepared in compliance with accounting standards. The implementation of accounting standards is also closely related to the regulatory theory. The regulatory theory describes the impact of market forces and pressure of regulatory bodies on financial statements. The regulations regarding the implementation of accounting standards have become more rigid and strict in the wake of the financial crisis which impacts preparation of financial statements severely. Managers are forced to comply with accounting standards even when implementation of these standards affects the organizational efficiency adversely.

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