Accounting Theory - Comparison between Positive and Normative Approach Essay

Accounting Theory - Comparison between Positive and Normative Approach - Essay Example The study of accounting theory enables to understand our past and provide us with a positive reception of how our recent practices and problems came into being. A historical investigation also tells that certain problems are continuing and may not be capable of an everlasting solution, for example, accounting for intangible and changing price levels. The accounting theory’s development came up because of needs and changes in accounting concepts and techniques. The main purpose of accounting is to plan periodic matching of revenues and cost. The accounting theory is classified into positive and normative accounting theory. This paper will take into consideration the positive and negative approach of accounting theories; their advantages and disadvantages, comparison and relationships between the two and evidence supporting that where each of the approaches might be appropriate in the current economic and business environment. Positive Approach The positive approach in accountin g starts with observations of financial information of business firms and on the basis of recurring relationships proceeds to draw overview and principles of accounting. Financial and accounting information, hence, represents recurring relationships leads to the formulation of principles. Different steps involved in positive accounting theory are: doing the observations and then recording of all the observations, analysis and then doing classification of these observations in order to detect recurring relationships, inductive derivation of principles of accounting and generalizations from those observations which signify recurring relationships and last step is the testing of generalizations (Rao, 2006, p.57). This approach is appropriate in the business environment in order to explain and forecast management’s choice of standards through analysing the benefits and costs of particular financial exposures in relation to allocation of resources and to various individuals within the economy. This theory is based on the propositions that shareholders, managers, and politicians or regulators are rational and that they try to make the best use of their utility, which is related to their reward and therefore to their wealth. The preference of an accounting policy by any of these groups depends on a comparison of the relative benefits and costs of different accounting procedures in such a way so as to maximize their utility. For example, it will be appropriate in such a business environment where it is assumed that management takes into consideration the effects of the reported accounting of numbers on political cost, information production cost, tax regulation, management compensation, and constraints found in bond-indenture provisions. The fundamental idea of the positive theory is to develop hypotheses about factors that persuade the accounting practices and to test the legality of these hypotheses empirically.     

Does diversity of opinion in the press matter any more, now we have Essay

Does diversity of opinion in the press matter any more, now we have access to participatory and social media - Essay Example As more users are turning towards opting new technologies and social media websites, and are showing reluctant behaviour towards reading newspapers. One possible reason for less circulation of newspaper today can be because of the ease that technology has provided. As with the innovations in the technology and the ease it provided for the masses in terms of using electronic gadgets, mobile phones and connecting online, the productivity of newspapers and print media have undergone decreases. More people are relying on internet and social media websites for the purpose of news, with it they are always connected to the internet and can read timely news, as this new medium (internet) is believe to be the fastest source of providing information or serving the purpose of communication. Furthermore, this medium also enhances the concept of diversification of opinion, as users around the world feel connected with each other and can share their views with the masses in no time. Moreover they can read or listen to the views posted by others, which at times gives them new perception to think about the same issue (Van Djick, 2009). Current Situation: Likewise in a recent past majority of newspapers from the United Kingdom and America were forced to follow the downsizing policy (2008). As a result significant numbers of employees who were working for the different newspapers were terminated, many prophesized the reasons behind these terminations were financial crisis, whereas others convicted internet and social media websites for these firings in the print media industry (Compton and Benedetti, 2010). However, there are many who have different perception in this regard, these individuals optimistically analyze these situations and believe that albeit social media websites and blogs have resulted in confining the role of newspapers and magazines but it has also resulted in providing more information and a variety of difference of opinions for the viewers (Compton and Benede tti, 2010). Meanwhile, it took a while in order to confine the long run and monopoly of newspapers and print media, as the relatively new medium (internet) is garnering more importance on the daily basis and conditions are ameliorating (Compton and Benedetti, 2010). At present print media is facing deteriorating conditions, majority of newspapers around the world are devising strategies in order to cope up with the financial turmoil and are also keen on enhancing or increasing their newspaper circulations. For instance, newspaper industry in the United Kingdom and North America reflect the situation of turmoil as many newspapers are facing bankruptcy, or are in a position where it is hard to manage their current expenses because of high cost involved in the system, there are some who ended their journey in this regard and some are knocking the doors or are in the verge of facing a serious collapse. Some prominent names of the newspaper industry of America, which were enlightening an d were sharing difference of opinions over the passage of time, are the best examples of this catastrophe. American newspaper Denver's Rocky Mountain News are history, on the other hand, The Philadelphia Inquirer, Chicago Tribune and The Los Angeles Times are amongst those newspapers which are facing serious financial catastrophe or in other words are