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Assignment on The Financial Accounting

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Added on  2020-04-01

Assignment on The Financial Accounting

   Added on 2020-04-01

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Running head: FINANCIAL ACCOUNTING ASSIGNMENTS 1Financial Accounting AssignmentsInstitution AffiliationName
Assignment on The Financial Accounting_1
FINANCIAL ACCOUNTING ASSIGNMENTS 2Financial Accounting AssignmentsQuestion 3Positive Accounting Theory is considered to be a common term for any concept that basicallyoffers descriptive data in regards to the conduct of accountants. This theory is also a branch of hypothetical study in accounting that tries to make good predictions of the actual world activities and then interpret them to accounting relations (Frias, Rodriguez, & Garcia, 2013). Positive Accounting Theory’s basic purpose is to understand and forecast the selection of accounting procedures across different organizations. The difference that exists between normative accounting theory and positive accounting theory is that positive accounting theoryis based objectivity and facts. This theory emphasizes on exploring the economic data and statistics at hand and delivering decisions based on the figures. Positive Accounting Theory also describes, predicts or explains what is happening in the world (Radebaugh, 2014). Consequently, the normative theory is basically subjective and intends to elucidate what the financial future must be for an investor or a business. As a result, normative accounting theory practices is a method of valuedecision that can present subjective ethics into accounting. Normative accounting theories also do not forecast the practices that are acceptable. The difference between agency theory and contracting theory is that agency theory enlightensthe relationship that exists between agents and principles in a firm. This theory is apprehensive with resolving diverse issues that can occur in agency interactions due to unaligned goals or diverse aversion levels to risks (Bonin, 2013). On the other hand, contracting theory is considered to be a theory that researches how economic performers can build contractual measures basically in the presence of unequal data. A standard activity in the contract theory is to embody the decision maker conduct under definite numerical
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FINANCIAL ACCOUNTING ASSIGNMENTS 3arrangements and then utilize an optimization process in order to ascertain ideal decisions. Agency costs are basically categorized into;Monitoring costs that are sustained when the principles try to restrict or monitor the agent’s actions (Tai, & Chuang, 2014).Residual loss is considered to be cost sustained from divergent agents and principal interest regardless of the use of bonding and monitoring.Bonding costs are costs incurred by agents.Positive Accounting Theory has been largely criticized that it does not offer prescriptions andthat the theory do not offer a way of improving the accounting activity. This theory has also been criticized that it has invalid assumptions that all activities are driven by a need to maximize the wealth of the shareholders. An efficient market is the market where the market price is considered to be an impartial estimation of the actual value of the project (Nisar, & Hanif, 2012). The three forms of the market efficiency includes;Weak form effectiveness which suggests that the market is considered to be effectual reflecting all the data of the market. This hypothesis implies that the rate of return on the market must be autonomous and historical rates of returns have no effects on the future rates. Semi-strong efficiency denotes that the marketplace is effective thus replicating all publicly accessible information and data. This hypothesis undertakes that inventories adjust faster so as to fascinate new data of the market (Sewell, 2011). Strong form efficient market indicates that the market is effective and thus reflecting all the data both private and public and incorporates the semi strong and weak form market efficiency. Question 5Corporate Social Responsibility is considered to be a company initiative to assess and take responsibility for a firms effects on social and environmental wellbeing. This aspect generally
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