HI6025 Accounting Theory and Current Issue Sample 1

Posted on December 26, 2023 by Cheapest Assignment

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HI6025 Accounting Theory and Current Issue Sample 1

Introduction

He particularly introduces the topic relating to the Positive Accounting Theory and focuses on its importance and vitality in the current scenario. He has shared the theory’s use and implications on one’s practical life.

The article mainly emphasizes Positive Accounting Theory (PAT) in the corporate world which is highly influenced by various external as well as internal elements. He also indicates the various positives of the model and how it is adding value and increasing the performance and efficiency of business concerns (Eggleston, 2014).

The primary aim of the assignment was to perform a thorough assessment of the various arguments that have been presented in our selected article. It is important to understand the difference between critical assessment and critique. Generally, a critique is done to identify the shortcomings of a certain subject or object. A distinct structure has been adopted to do this particular assignment (Gray, 2017).

The assignment includes a summary part which gives a brief idea about the article, research questions include the concerns that arise in the article, theoretical framework which is of prime importance and finally the limitations of the specific subject followed by a conclusion. It is vital to cover all the segments to understand the concept effectively (Juárez, 2015).

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Summary of the Article

The article that has been chosen for our particular assignment is made by adopting the foundation of estimation or predictability in a real-life scenario. The article has been created to argue with the stand that the trend and intensity of the financial market and capital market cannot be predetermined or predicted in advance. Liyan said that it focuses on the significance of behavioral finance to support the predicting function.

The author Paul has attacked the theory of Efficient Market Hypothesis (EMH) (Liyan, 2013). He has specifically mentioned that the Positive Accounting Theory is useful and can be effectively used instead of the EMH model. The author has included several findings in the article which have been discussed below:

The Positive Accounting Theory is pretty effective and generates constructive estimations when applied in real-life situations hence it can be helpful in the accounting setup as well. In the accounting world, it is crucial to identify and understand the main reasons which cause a particular event. The PAT concept is very likely to predict or forecast the events that have a connection with a particular business organization. The author of the article suggests the application of the PAT model to forecast the viability and capability of a business firm in the current competitive market. According to them the financial managers can use their knowledge of financial trends and ascertain the organization’s scope of growth based on the PAT predictions. At the same time, there are a few people who do not support his views and think that investors in the market can’t make any predictions by using the Positive Accounting Theory.

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Petruk, Legenchuk & Koroliuk, believe that better models like Altman A-Score are unable to predict the efficiency of a firm so for PAT it is impossible. The author has stated that the decision-making function is a significant part of any firm and the transparent and simple process of decision-making increases the effectiveness of a firm in the long run (Petruk, Legenchuk & Koroliuk, 2013).

The selected article has suggested the idea that predictability mainly depends on the application of accounting standards and policies that are adopted by an undertaking to perform productively in the market. As per Savchuk, the statement means that the application of efficient and positive accounting principles will bring about favorable predictions for the firm. After analyzing the above statement, it was deciphered that the argument is accurate. The application of accounting rules and standards is efficient in managing and controlling the well-being of the organization (Savchuk, 2015).

Most financial experts suggest that firms need to adopt International Financial Reporting Standards (IFRS) since it has been designed ethically and focuses on the significance of efficient management of the financial aspects of any business concern. The author has emphasized the use of relevant accounting treatment since it has an impact on a firm’s productivity, performance, and goodwill in the market (Thorhauge, Haustein & Cherchi, 2016).

The author has also stressed the need for the survival of business concerns. A crucial segment of the article is that when a firm uses the PAT model, its chances of survival in the external environment increase. In the present business scenario, where there is a high influence of industrialization and technological advancements on the performance of firms, the businesses need to focus on creating various opportunities for their respective shareholders so that at the end of the day they can increase their competitive stand. The increase in the competitive stand has a strong link with the long-term survival prospects of the firm (Vosslamber, 2013).

The article also states that business firms are not acknowledged by their revenue value but by the various contracts and projects that they are involved in, in a specific financial year. It also tells that firms must not take up every contract that comes their way but they should analyze the profit potential of the projects in hand and decide on the projects.

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According to Zambon & Girella, there is an important link between the productivity and efficiency of a concern and the projects that it considers for its growth and expansion (Zambon & Girella, 2016). A productive project increases the potential of the firm and increases its economic presence in the market.

In the final argument in the article which is about the selection of contracts and projects, the use of PAT is significant since it minimizes the cost of the selected contracts. This is because PAT helps firms to focus on projects which are relevant to the business and its prosperity. It can be said that the positive accounting theory helps the firm to prioritize the projects that will enhance its financial performance.

Research Questions

The research question in any reported study is vital since it focuses on the concern areas and helps in finding an answer to the concerns. The following research questions have been identified for a better understanding of the subject under study.

  • What role does positive accounting theory play in strengthening the financial position of an organization?
  • How does PAT affect the strategic function of an undertaking?
  • How can any business operating in the market have an advantage for better viability by using the PAT model?
  • Why is the PAT concept useful for all firms?
  • State the connection between the concept of PAT and the application of relevant accounting policies and rules.

All the research questions mentioned above cover a broad topic, and the researcher has used an effective technique to answer them comprehensively.

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Theoretical Framework

As per Vosslamber, the theoretical framework is one of the most vital segments of a report. It is the structure that supports a particular theory for the primary object of study and analysis. It is used to understand and assess the particular research problem at hand. All the report analyses which involve quantitative analysis and any hypothesis attached to the report have a theoretical framework that is useful for the research (Vosslamber, 2013).

The particular article under study has analyzed the vitality of positive accounting theory and how it strengthens the financial and strategic function of a company. The author also focuses on the use of PAT to increase the viability of a firm in a competitive market. The flowchart helps in the better understanding of PAT and its impact on various aspects of a business undertaking:

HI6025 Accounting Theory and Current Issue Sample 1

The stated theoretical framework has been used in the article and shows the impact of PAT on various aspects of a firm. The various influencing points of the positive accounting theory have been evaluated to conclude how the overall productivity of a firm is impacted by PAT (Zambon & Girella, 2016).

Significance and Limitation of the Article

This part of the assignment is vital to understand how the same is useful to various readers and it also highlights the various shortcomings of the assignment. Since our particular research has been conducted on a topic that is currently trending and affects all concerns since it deals with Accounting Management, it is highly important. Since the degree of significance of our research activity is very vast, it can satisfy the needs of various readers. This research topic is highly useful for companies who wish to adopt the positive accounting theory in their respective work processes (Thorhauge, Haustein & Cherchi, 2016). The research subject is equally vital for the researchers who wish to conduct a research study on the same topic concerning PAT.

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The researcher has adopted a quantitative research technique to analyze positive accounting theory which is logical since it is an accounting-based research. According to Vosslamber, the particular research design which has been adopted is not very effective since the research design is exploratory and the researcher has assumed that the research on the particular topic was conducted for the very first time. He believed that it was a first of its kind it would be a perfect example in the current economic scene (Vosslamber, 2013).

However, this particular assumption by the researcher is wrong since there are a few studies that have been conducted on the same subject. It has been advised to adopt a casual research design instead of the applied research design since it will be more effective and the results of the study will be simple and clear to understand.

The casual research design will help the research team to analyze the cause-and-effect relationship between various applications of the positive accounting theory and its influence on numerous elements of a business and its operations (Petruk, Legenchuk & Koroliuk, 2013). This model will give a better understanding of how accounting theory improves the viability of a business concern in the market.

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Conclusion

The article which has been selected titled “Half a Defence of Positive Accounting Research” totally focuses on the positive accounting theory and its significance and applicability in the real-life scenario especially in the accounting scenario. It has been understood that using PAT in a business setting can be beneficial for the firm since it will companies to increase their sustainability and will also help the shareholders of the concern to increase their equity position.

The research has also focussed on the significance of taking up different contracts and projects that will maximize the financial performance of a concern. It states that the adoption of the positive accounting theory helps firms to reduce costs since it allows companies to focus on the projects that can enhance their performance in the market and it helps firms to avoid or ignore the projects that are not relevant to their growth and prosperity. The various points that have been highlighted about the accounting theory are right and the use of this theory by undertakings will give them a competitive advantage in the market and help them to survive more efficiently in the external business environment. Thus the study helps readers to understand the concept and applicability of the positive accounting theory.

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References

Eggleston, B., 2014. Accounting for the data: Intuitions in moral theory selection. Ethical Theory and Moral Practice, 17(4), pp.761-774.

Gray, D., 2017. Foreign currency translation by United States multinational corporations: toward a theory of accounting standard selection. Routledge.

Juárez, F., 2015. The Accounting Equation Inequality: A Set Theory Approach.

Liyan, L., 2013. The impact of information technology on accounting theory, accounting profession, and Chinese Accounting education. WHICEB 2013 Proceedings, Paper103, pp.748-753.

Peng, S.S., Graham, C. and Bewley, K., 2013. Fair Value Accounting Reforms in China: Towards an Accounting Movement Theory.

Petruk, O.M., Legenchuk, S.F. and Koroliuk, N.M., 2013. Development of Accounting Theory in English-Speaking Countries: On the Way to Multi-Paradigmatic Discipline. Облік і фінанси, (3), pp.48-56.

Savchuk, V.K., 2015. Improved analytical training of accountants agricultural units, Rozvytok bukhhalterskoho obliku: teoriia, profession, mizhpredmetni zviazky [Development of Accounting: Theory, profession, interdisciplinary communication]. In Zb. materialiv IX Mizhnar. nauk.-prakt. conf (pp. 437-439).

Thorhauge, M., Haustein, S. and Cherchi, E., 2016. Accounting for the Theory of Planned Behaviour in departure time choice. Transportation Research Part F: Traffic Psychology and Behaviour38, pp.94-105.

Vosslamber, R., 2013. Accounting Theory: Research, Regulation and Accounting Practice. Pacific Accounting Review.

Zambon, S. and Girella, L., 2016. Accounting Theory and Accounting Practice as Loosely Coupled Systems: A Historical Perspective on the Italian Case (1930-1990). FINANCIAL REPORTING.

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