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Accounting Theory and Current Issue

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  • Level: High school
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Introduction

PAT is considered the most significant tool because it gives full information regarding the actual transaction which takes place in the business world (Gunderson and et.al., 2013). This method helps to convert all accounting transactions and make effective predictions about the accounting entries. It is also considered the scientific method which helps organizations to make intellectual decisions' and also assists in understanding the real cause-and-effect relationship. According to the concept, of positive accounting the manager and firm need to choose such accounting methods through these concepts firm can represent their won performance significantly but these concepts have some positive and negative impacts (Ball, 2013). This report make an analysis on the Positive Accounting theory and critically evaluates it in an effective approach. This report also makes an analysis of the Hypotheses and the effectiveness of the Pat model. In the last, an analysis of the limitations of the PAT article will be described in the present report.

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Aim

The main aim of this research study is to gain a clear understanding of the Positive Accounting Theory

Objective

  • To gain knowledge on the Positive Accounting Theory
  • To Know to limitations and identify the significance of PAT
  • To make a clear understanding of the Positive accounting concepts.
  • To understand the effectiveness of article theory and its practical approach.
  • To make recommendation on accounting methods which assist in preparing accounting reports

Research Question

In order to make effective research the PAT along with research hypotheses are based on the statistical tool. This helps to research to make effective research on accounting concepts. Through this tool, the actual objectives of the research can be achieved (Gunderson and et.al., 2013). PAT is considered the most significant tool because it gives full information regarding the actual transaction which takes place in the business world. It is commonly used in quantitative positive accounting research and the null hypothesis is done in a computerized manner. In this present report researcher uses hypotheses which is appropriate and able to understand the usefulness of the positive accounting theory. As per the discussion, in this present report facts are totally based on imagination and no one has control over the imagination (Indjejikian, Matějka and Schloetzer, 2014). This shows that accounting figures can change at any time so managers need to be prepared have to be prepared for the modification and modifications should be made accordingly hypothesis. With the help of this hypothesis, scholars draw a literature review For conducting research both qualitative and quantitative methods have been used. So it can be concluded that using different types of methods and statistical tools helps to make their research more effective. It also helps to make their hypotheses accurate and authentic. Along with this, some arguments are also presented PAT is not effecting any transaction and it is also considered that very few people have knowledge about it. However, there is some research which makes arguments that the PAT approach's results are equal to their other research results.

Theoretical Framework

PAT is a very useful concept which helps organizations to achieve their significant objectives. Its concepts include different concepts innumerable computations, problem-solving, give in dept information in specific formats So can be analyzed and interpreted by people. It helps them in the decision-making process (Penman, 2016). To apply this concept an organization is the choice of the manager but applying this concept does not affect pricing and standards which is related to accounting decisions. In order to make implications of the PAT concepts regulations is the biggest factor which can influence the overall transaction and financial reports. PAT is an effective financial tool that assists organizations in predicting accounting practices. This theory also consists of accounting standards and their hypotheses. PAT is that concepts which practices concepts on the basis of current situations (Crawford and Lepine, 2013) But it is not necessary that prediction is always right and along with this record also does not make an effective approach they need to take a model that is not making effective practices. The positive approach to development accounting relies on the basic assumption that helps policymakers to make an effective decision (Waymire, 2014). It assumes that all the decisions that are being made would be a result of rationally where accountants can follow the best options.

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In this report, critical evaluation can be on the basis of prices and investors who make their decisions on the basis of this theory (Penman, 2016). On the other hand, there are some other accounting theories which give completely different types of direction to the researcher. There are two types of accounting concepts which can be used by normative or positive approach. The normative frameworks are conceptual frameworks which are used by the organization. With the help of this theory manager of a company can understand ways in which financial records are modified. There is much research which makes strong criticisms of the use of the PAT approach but it has still not lost its significance and is also applied by business concerns in many situations. The aim of this concept is to concentrate only on the theoretical area and economic aspects of organizations (Shiino, Stiner and Stiner Jr, 2014)
It can be said that PAT does not focus on perception and does not focus on the improvement of accounting practices. The positive approach is not an alternative to the existing approaches or principles in case they are considered irreverent. PAT analyses only existing principles and makes no recommendations for the principles that need to be used. By conducting research it is found that PAT contain some assumptions for their self interests and there is one other facts that make nay kind of modification (Waymire, 2014). So it is said that the normative approach is more effective. Thus, it is clear that the normative approach presents extremely practical way methodologies for the development and formulation of accounting theories. On the other hand, positive approaches only help in analyzing and assessing the nature of the methodologies adopted.

Significance And Limitations of the Article

Limitations of Theory

Positive Accounting Theory is considered a concept that possesses various limitations because this accurate report could not be prepared by the firm. One of the main limitations of PAT theory is that lack of prescription influences the implementation of the theory. However, particular research assesses that it helps scholars to practice positive accounting within a firm and attain desired objectives (Beattie, 2014). With the help of PAT theory, it assists in identifying that no prescription is required in order to implement the model and thus identify the issues related to the model. Further. It also evaluates that such theories do not give any detailed information regarding improvement within the accounting practice and thus help the firm to improve its performance in the market. Thus, adopting such accounting practice helps in implementing a theoretical framework so that deficiencies can be identified. Therefore, it is essential for businesses implementing PAT theory to bring improvement so that desired objectives can be attained. Thus, a proper strategy needs to be implemented in regard to adopting effective accounting theory and thus provide proper solutions so that managers of firms can overcome the same (Bublitz, Philipich & Blatz, 2015). However, if the managers do not possess effective knowledge regarding PAT then it impacts upon the final report prepared by the firm. Therefore, positive accounting is required to be effectively practised so that lack of interest in the numerical values impacts upon the implementation of accounting reports.

Furthermore, another limitation faced by positive accounting theory is that it is not valuable it requires a certain cost to implement it within the business as it helps in identifying self-interest so that managers of firms face problems in regard to carrying out good accounting practices. The given article on positive accounting theory helps in developing the fundamental assumption that it does not help the firm in accomplishing the study in an effective way (Glover, 2014). However, it criticizes the researcher's point on a good accounting system which results in developing self-interest so that issues faced could be overcome. There is another crucial limitation of PAT that it is stagnant and thus it creates issues for business that needs to be overcome by adopting effective theory so that business can enhance their operations in an effective way. However, such issues have been prevailing since 1970 but in current times businesses have added certain effective accounting system that results in overcoming the major problems so that best results can be attained. Positive Accounting Theory helps managers of firms to identify that implementing positive accounting patterns results in overcoming the issues faced by firms and thus develop appropriate measures and improve accounting practices (Wang, Che, Fan & Gu, 2014).

The methodology used in the article

The researcher uses several methodologies in regard to carrying out a study on positive accounting patterns and thus selects one methodology from qualitative and quantitative methods. Here, the researcher uses a qualitative method that results in implementing PAT theory within the study. Further, exploratory research design helps the researcher to carry out the study in regard to implementing the PAT theory. All such methods result in collecting data and thus obtaining desired outcomes (Dufour, Teller & Luu, 2014). In the present research, descriptive research design has been used which results in providing accurate outcomes and helps the researcher to improve the PAT in order to implement a good accounting system. Researcher also helps in supporting the positive accounting theory through using qualitative research methods and thus helps managers in regard to implementing a positive accounting system and achieving desired results.
However, the main benefit of implementing qualitative tools results in providing accurate results so that PAT can be effectively implemented. While implementing such a method helps the researcher to support the observation and thus collect the information by looking at effective accounting practices implemented within the firm. Such research method is considered as implementing results in obtaining positive outcomes regarding PAT theory and improving the accounting system within the firm (Fernando & Lawrence, 2014). Implementing such a theory helps in obtaining effective subjects and thus obtains knowledge about PAT.

Limitations

There are various limitations faced by researchers at the time of conducting the study on positive accounting theory. However, the main issue faced by researchers at the time of implementing PAT is lack of time. Thus, it is one of the effective issues faced by researchers as they need to review various articles based on positive accounting theory (Beattie, 2014). However, the researcher faces issues related to time duration in regard to implementing mathematical formulas. Hence, they are not able to provide accurate results so that possible outcomes can be attained. Moreover, another limitation faced by scholars is regarding the lack of funds. Thus, it is another major issue that restricts researchers from using the data for PAT. Hence, these are major limitations faced by researcher in regard to implementing positive accounting theory.

Hence, all the limitation faced by the researcher and thus it affects the study. However, it is essential for scholar to obtain effective results and thus implement appropriate objectives and thus PAT could be implemented in an efficient manner. Also, it could be evaluated that implementing a theoretical framework helps in adopting an effective approach and thus improves the PAT within the firm in regard to obtaining positive accounting (Bublitz, Philipich & Blatz, 2015). Further, implementing methodologies helps in selecting qualitative research and thus affects the actual objectives of the study so that desired targets can be attained.

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Conclusion

From the overall report, it could be summed up that PAT theory results in identifying the positive accounting system and thus implementing the same it helps in overcoming the ill effects of accounting within the business. Also, it has been identified that PAT theory possesses certain importance as well as limitations. Therefore, it is essential for researchers to overcome the identified problems and thus improve the performance of the firm. The researcher selects qualitative data in regard to explain the information and test the same.

References

  • Ball, R. (2013). Accounting informs investors and earnings management is rife: Two questionable beliefs. Accounting Horizons.
  • Crawford, E. R., & Lepine, J. A. (2013). A configurable theory of team processes: Accounting for the structure of taskwork and teamwork. Academy of Management Review.
  • Fernando, S., & Lawrence, S. (2014). A theoretical framework for CSR practices: integrating legitimacy theory, stakeholder theory and institutional theory. Journal of Theoretical Accounting Research.
  • Gunderson, E.A. & et.al., (2013). Parent praise to 1to 3yearolds predicts children's motivational frameworks 5 years later. Child Development.
  • Indjejikian, R. J., MatÄ›jka, M., & Schloetzer, J. D. (2014). Target ratcheting and incentives: Theory, evidence, and new opportunities. The Accounting Review.
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