Methods of Inquiry: Financial Accounting Research Analysis

This report provides a comprehensive examination of epistemological and ontological research within the field of financial accounting. It delves into the core principles that guide applied and value judgment research, emphasizing the philosophical, sociological, and historical perspectives. The report critically analyzes both quantitative and qualitative research methods, discussing the use of financial statements, and financial data. It also explores the strengths and weaknesses of different research approaches, highlighting the importance of designing appropriate balance sheets and considering ethical constraints. The report evaluates contemporary study ideas in finance and accounting to highlight research problems and strategies. Finally, it examines the role of accounting theory, including positivism and normative theories, and the influence of economic theories on accounting standards, offering a detailed overview of research in financial accounting.

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Epistemological and Ontological Research on Financial Accounting
Institutional Affiliation
Name
Date

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Epistemological and Ontological Research on Financial Accounting
1. Introduction
Most significant attractions for conducting epistemological (applied) and ontological
researches in finance or any other related business attachment bring about reality and judgmental
perceptions (Denscombe, 2010). This therefore brings global views into conflicts and lines of
arguments about accounting practices in order to hike severe doubts on the professional
values.This research bases on the author’s reflection about epistemological and ontological
issues in relation to the financial accounting department (Collis J & Hussey, 2014). The reason
of this paper is to explain principles that guide applied and value judgement research in finance
field without the proposed solutions given to the pitfalls under this paper (Gill J & Johnson,
2010). Most significantly, the perspective of epistemology and ontology, this paper advocates for
the philosophical, sociological and historical study perspectives attached in finance and
accounting view.
The number of researchers such us Brownell in 1995 explained the researchers about
accounting and finance as parasites (Smith, 2015). This is because the authors who mostly prey
on some other researches generated not on their findings, this is evident that researchers of
finance and accounting have few theories for their own but rather base on the economic,
psychology, sociology and accounting as their fountain sources since they had no approaches
(Kothari, 2012). The general purpose of this paper is to examine the epistemology and
ontological research in finance and accounting fields (Saunders et al, 2009). To accomplish such
objective, specific objectives are identified in order to contribute the purpose and the goal of
research.
 The evaluation of contemporary study ideas in finance and accounting in
order to highlight research problems and identified strategies.
 Creation of alternative awareness of different methodological methods for
selection of appropriate method.
 The potential of reviewing existing studies to put escalations on the
published articles
 Assessment of the ethical constraints for the case of accounting.

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2. Strength and weakness of research methods
2.1 Accounting Practice and Accounting Theory
The article by WELL in 1976 about researches in financial accounting stated; “It is quite
difficult and amazing to answer the questions generated from the wide concept of accounting
since there is a process of measurement, identification, recording and communicating especially
on economic knowledge” (Bruhn, 2013). This point of view was deprived from WELLs in 1976
unlike other concepts of financial accounting which focus on the application of knowledge
among researches in financial accounting (Bruhn, 2014). Therefore, the purpose of the study is
not to criticize the specified definition of research in accounting, rather arguing about the
difficulties to understand scientific phenomenon in accounting. In addition, the purpose of
assessing accounting as the applied field is vital research in order to create and raise the
knowledge about scientific field (Oaks et al, 2014).
Most specifically, the goodness for conducting research in a given field such as finance
and accounting base on extent of how the stipulated methods are applied in order to raise the
field’s body of operations. By considering this line of reflection, it is believed that before
perception and appreciation for applied research in the field, it is useful to consider the
distinctions and some associations between the practice and theory of accounting (Oaks et al,
2010). According to the KUHN’s framework in 1972 about ontology and epistemology research,
identified the prepositions that are attached to the rules about inferential view (hypothesis testing
and conclusions). The framework of inference allows the formulation of frame on the
development of the practices as per accounting and finance is concerned (Erickson, 2012). In
relation to the KUHN’s framework, the research by Hendriksen in 1982 collaborated by adding
the theory of accounting that was defined as logical knowledge in terms of wide principles and
these include; provision of general frame work about referencing of the practices in accounting

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and the evaluation criterion. Secondly is that guidance to the development of arising practices
and new procedures (Oaks &Gippel, 2013).
Furthermore, according to such principles, it is agreed that the coming steps in
accounting perceptions in the scientific research is done to identify theories of accounting
initiated and verified. Also, suggestions by Popper in 1982 that knowledge in accounting is a
field of positivism and normative theories to be developed on the inferences (Gippel, 2013). In
this case, ‘Normative’ depicts that theories in accounting that contains the values arising from
judgement creating differences from statements from facts in relation to the purpose of the study.
This can be seen from the market value of the equity of the firm. In addition, the conclusions on
normative research are often given various recommendations that are not advocated by the
practitioners in accounting field (Kaczynski et al, 2014). On the other hand, Positivism theories
try to identify the critical evaluation about accounting since they explain accounting knowledge
that should be given out by the researchers.
Furthermore, empirical attributes about accounting theory since they are easy to be
justified. Also, according to Sterling in 1970 gave mathematical and logical procedures to be
classified as ‘non-empirical studies’ (Knoblauch, 2013). The theories of accounting are
specifically vital basing on the experience and observations from the quantitative and qualitative
changes of equity being learned from financial accounting strategy, this is due to the dysfunction
of budgetary behavior in the management of accounting.
Most significant is that, premises of accounting and conclusions that base on the fountain
of inductive inferences. In accounting and finance, bookkeeping approach using the double
entry is served to demonstrate this point of view (Ram,2010). The system of double entry
involves the changes of the firm’s wealth and try to evaluate qualitative and quantitative research
in relation to the firm’s equity. Subsequently, most works introduced in sixteenth century under
accounting field involve assets, income and liability as well as costs and revenue of the firm
(Daniel&Aroma, 2011). This therefore calls upon both qualitative and quantitative researches for
proper analysis and at times prediction of future results on the sales, revenue costs and other
variables in the question.

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3 Critical Analysis of Quantitative and Qualitative methods in Accounting fields
3.1 Financial statements
Well-informed entrepreneurs employ different financial statements to perform efficiently.
Some of these include; balance sheet, cash flow statement, a budget, accounts receivables among
others. The “Balance sheet” contains all the assets and liabilities indicating the net worth of a
business. A cash flow statement allows a businessperson to know when to receive money and
when to pay debts. The accounts receivables report the level of payment of one’s customers.
Also, the budget contains the income earned and expenses incurred monthly or annually. The
budget contains variances that analyze the performance of the business moves with the
projections of the businessperson. On the other hand, comparison reports allow the review of
business performance from year to year (ABS, 2018.)
3.2 Quantitative Financial Data
This contains numbers and therefore only measurable contents such as expenses, profit
margins, revenue and taxes are found there. The numbers can be reduced into quantifiable
figures that suit the financial performance of the firm. For instance, total costs can be divided
into fixed costs and variable costs to predict the cost of fixed assets such as machinery and
buildings and the cost of variable goods and services. In case one knows the profit margins, he is
able to project the gross profits if the prices of commodities are reduced and the volume of sales
are reduced or increased. When there is an attribute in the increase of a dollar to a particular
expense then investment can be calculated in terms of returns.
3.3 Qualitative Financial Data
Quantitative financial data is used to determine the incalculable effects of various
transactions on a business. The best example is spending money on a customer service that does
not affect the sales nor brings in any profit but its intention is to keep customers satisfied and
happy so that the business does not incur losses in sales. Also sponsoring a sports match may not
increase revenues to the business, however, the goodwill and branding can be increased and this
fortify the balance sheet (William et al, 2015) A goodwill refers to an asset that contributes to
more sales in a business. Calculating the actual dollar return from the human resources spending

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program may be very difficult but one can employ qualitative projections to predict the increase
in efficiency, employee maintenance, productivity and morale in business do finish the expenses.
3.4 Designing the right Balance
Financial statements enable a business person to give a combination of qualitative and
quantitative data so that suitable decisions are made for the firm. As quantitative financial data
enables one to begin with the essential requirements of the business say revenue, expenses and
the percentage of gross returns from investments. On the other hand, qualitative financial
statements will enable the business person to find out if the expenses brought about by activities
are worth the money spent on them. An example is the use of loss leaders by retailers through
selling goods and services at slight losses to get customers closer(Academic Journal Guide,
2015). The customers in this case may either be customers have been existed for long or first-
time customers who are predicted to stay. The qualitative financial data will indicate whether the
business losses money by use of these loss-leaders well as the qualitative financial data or
statement say sales report which compare sales, and prices for different time frames helps the
business owner to determine whether the program of loss leader raised prices and profits or it did
reduce them (David,2010).
4. Evaluation and Methodology in Accounting Research
Accounting is taken as the process on which firms and organizations give out
information about economic and financial activities in relation to various users outside the firms.
In this line, several arguments are raised on financial and accounting theories that are responsible
in determining the rules on practices of financial accounting(Academic Journal Guide, 2015).
According to Blaikie in 1993, ontology presumes that specified approach especially on the social
fountain brings about view of ‘social reality’. Also, Ontology specifies the understanding of
critical issues in the field in the way that researcher retrieve reality. Most important is that, there
still exists the arguments among philosophers about the implications of real researches. The
arguments are developed basing on two dimensions of relativism and realism, Ontology
approach due to its taxonomy is based on the six various assumptions on viewing the world’s
reliable studies on accounting and finance fields. The assumptions of concretes structure of
reality under ontology taxonomy are; contextual information in the field (transcendent realism),

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conceptual relativism, discourse symbolism (conceptual relativism), ‘transcendental idealism’,
construction socially and lastly imagination of human beings (idealism). Moreover, economic
theories especially the agency and stewardship models that underpin standards of accounting
which may need the financial information disclosed. For instance, in US financial accounting
researches established immediately after emergence of securities act in 1934 thus creating the
security exchange commission as the regulatory agency. However, such as agencies need to be
put on hold since researches both quantitative and qualitative provide fountain of policy making
to the financial institutions.
Due to continuous researches (both qualitative and quantitative) on both levels of
ontology and epistemological levels the field of accounting has undergone several plethora of
researches to investigate and even propose new principles and procedures of accounting
(Academic Journal Guide, 2015).Wattz in 1886 argued that theorists on accounting became more
influential in prescribing the way how organizations report their findings and operations, very
few concerns emanated from exhibition of empirical validity about the hypotheses on the
obvious studies rested. The normative approach was used in finding the properties of accounting
to be put under evaluation in form of proximity for the specified ideology.
5. Evaluation Published researches in Finance and Accounting Fields
It is emphasized that normative approaches that were adopted in accounting studies in
legitimate days still exists in current researches. This approach seems to be influenced by tw0
factors and these include; the guidelines given to the researchers and the perspective of the
sociology (Bruno et al, 2015) The accounting theories need to follow general principles in the
way of grooming the practices of accounting. By considering the article developed by
Hendriksen in 1982, arguments raised from current studies;
The article by Hendriksen;“if we wish to evaluate current accounting practices, it may be
necessary to start identifying the procedures and rules applied in the accounting practice, and
from that attempt to establish general presuppositions and theories” (Bruno et al, 2015).
The article by Hendriksen was correct since it advocated the adoption of practices in
accounting as current methods of operations come on board. As time goes on changing, different

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ways of researches should also vary in relation to the activities being performed in the financial
institutions. The financial statements should base on the current approaches in order to draw
policy decisions that are reliable and consistent. According to Ryan in 1992, the efforts of
simultaneous researches that are significant were being conducted by the economists and even
the economics oriented accountants especially in UK (Aljukhadar et al, 2014). Most of the
accountants were interested with the emergence of principles and practices (approach based on
normative strategies) that could produce inductive actions in relation with the prevailing
practices (Mukul& Deepa,2011). Furthermore, according to their analysis, they argued that
financial accounting authors advocated for the hypothetical models in attempt to derive
measurements of incomes and costs existing in the accounting firms. For this case, one of the
fundamental assumptions as financial accounting is concerned, income measures are required to
help the stakeholders and investors to make decisions for their own interests. This therefore led
to the staunch existence and usage of predictive criterions in accounting researches (Barnham,
2015). The predictive strategy altered new empirical researches following the effects of
accounting information on policy making. Several studies assessed the behavior about the policy
makers that they have faced in various ways of presenting and reporting intervals about
accounting knowledge. The researches in the accounting fields could be in normative form that
are likely to be replaced by the positivism approach. This is therefore reflected with the financial
researches about economic information, prices and behavioral measures.
6. Conclusions about Ethical awareness and understandingqualities of Research
methods
As per the studies reviewed from the peer-peer studies, the current study lays a stone on
the main research issues to be followed when making researches in firms especially in
accounting and finance fields. Due to the need of being informed to the value and transactions
made by the financial firms, ontology approaches are recommended to be used more than
epistemology. This is because ontology brings clearly the image of reality by running the
quantitative studies. This can be done through performing of time series data about the values of
historical, current and predictive values for policy making in the organization (Bragge, P. 2010).
However, this cannot be evaluated in a proper manner since value judgement procedures
(epistemology). It is believed that ‘numerical accounting’ brings it clear to the aspects of

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financial institution’s reality that can be quantified and developed on the accounting model. And
most of organization’s policy makers do not base on the qualitative or judgmental results since
the quantitative results shows the trend which is stationary, positive or even negative.

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