University Accounting Theory: Contemporary Issues Analysis Report

This report provides a critical analysis of an accounting research article, focusing on accounting theory and contemporary issues. The report examines the role of accounting professionals in applying accounting theories, particularly positive accounting theory (PAT), and its relationship with financial accounting theory. It delves into the importance of understanding different theories, such as normative theory and agency theory, and how they influence accounting policies and practices within organizations. The analysis highlights the significance of PAT in understanding how the world functions, the impact of opportunistic behavior by individuals, and the use of accounting to manage relationships between stakeholders like managers and owners, as well as managers and debt providers. The report also references relevant literature, including works by Watts and Zimmerman, to support its arguments. This report aims to provide a comprehensive overview of accounting theory, offering insights into its practical applications and relevance in the financial world.

Running head: ACCOUNTING THEORY AND CONTEMPORARY ISSUES
ACCOUNTING THEORY AND CONTEMPORARY ISSUES
Name of the Student:
Name of the University:
Author Note:

1Accounting Theory and Contemporary Issues
Table of Contents
Answer to question C:.....................................................................................................................2
Answer to question D:.....................................................................................................................3

2Accounting Theory and Contemporary Issues
Answer to question C:
In this article the accounting profession is suggested with some strategies to follow like
the evidence on the theory. It is very important for the professionals to know about these tests
while conducting any article research related to accounting theory. After the tests are done the
accounting professionals are asked to study the combinations of three sets of variables. Different
hypothesis are applied by the accounting professionals. Positive accounting theory have
introduced many important roles and accounting professional is one of an important role because
they are responsible for any accounting decision and strategies that are taken based upon the
prepared accounting statement for any of the company or research paper (Watts and Zimmerman
1990).
It is needless to say that each and every organization requires accounting professionals
who would help them to manage their accounting parts. All the theories that are been discovered
and researches that are done by the accounting professionals only so as to imply the result and
findings into some practices. In the beginning of the article there are some introduction related to
transactional cost which is important to analyze the positive accounting theory is also done by
the accounting professionals because they have a great knowledge regarding this topic and they
know how to imply the theories into different practices. These practices are then utilized to
analyze the long-term and short-term incentives earned by the company throughout the financial
year. The analysis is here done with the help of some hypothesis which is evaluated by
accounting professionals (Sciencedirect.com 2020).

3Accounting Theory and Contemporary Issues
Answer to question D:
This article has a close relevance to the unit financial accounting theory because every
research paper whether in the initial stage or at the conclusion part, needs more than one
accounting theory related to the article which helps the researcher to evaluate the findings and
come up with a solution. Positive accounting theory is an important part of financial accounting
theory (Watts and Zimmerman 1986). This theory is different from the normative theory because
in general the PAT theory defines how this world can function in value-free way and normative
theory explains the value-based view and how to work. Accounting policies made by any
company will result in efficiency of the management and ultimately the organization in the
competitive market. It is assumed that under the PAT theory the main action by the individuals
are driven by the individuals and self-interest as they would act in an opportunistic manner
which will help them to improve their efficiency and earn more profit.
Proper relationship is defined between different individuals and it is explained how the
accounting practices are used to help the functioning of these relationships in PAT theory. These
relationships can be between managers and owners, managers and firm’s debt providers. Hence,
PAT theory being a part of accounting theory can help the organization to understand the current
market situation and set the organization strategies and policies accordingly. Agency theory can
be stated as a supportive theory for PAT where it explains as why a particular theory is selected
for a particular accounting method (The Business Professor 2020).

4Accounting Theory and Contemporary Issues
References:
Sciencedirect.com, 2020. Accounting Profession - An Overview | Sciencedirect Topics. [online]
Sciencedirect.com. Available at:
<https://www.sciencedirect.com/topics/social-sciences/accounting-profession> [Accessed 6
April 2020].
The Business Professor, 2020. Accounting Theory - Definition | The Business Professor. [online]
The Business Professor. Available at:
<https://thebusinessprofessor.com/knowledge-base/accounting-theory-definition/> [Accessed 6
April 2020].
Watts, R.L. and Zimmerman, J.L., 1986. Positive accounting theory.
Watts, R.L. and Zimmerman, J.L., 1990. Positive accounting theory: a ten year perspective.
Accounting review, pp.131-156.