An In-Depth Analysis of Positive Accounting Theory and its Impact

This report provides a comprehensive analysis of Positive Accounting Theory (PAT). It begins with an introduction to PAT as a significant tool for understanding business transactions and making accounting predictions. The report outlines the aim and objectives, which include gaining a clear understanding of PAT, its limitations, and its practical applications. It explores research questions and the use of hypotheses, emphasizing the role of statistical tools in accounting research. The theoretical framework discusses the usefulness of PAT in achieving organizational objectives and its impact on accounting standards and financial reports. The report also evaluates the significance and limitations of PAT, including the lack of prescription, the influence of self-interest, and the use of qualitative research methodologies. The conclusion summarizes the importance of PAT in identifying positive accounting systems and overcoming accounting issues within businesses.

Accounting Theory and
Current Issue
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INTRODUCTION
PAT which is considered as the most significant tool because it gives full information
regarding to the actual transaction which take place in business world (Gunderson and et.al.,
2013). This method help to convert all accounting transaction and make effective predictions
about the accounting entries. It is also considered as the scientific methods which helps to
organization to make intellectual decisions' and also assist to understand the real cause of effect
relationship. As according to the concept, of positive accounting to the manager and firm need to
choose such accounting methods through these concepts firm can represent their won
performance significantly but these concepts has some positive and negative impacts (Ball,
2013). This report make analysis on the Positive Accounting theory and critically evaluate it in
effective approach. Along with this report also make analysis on the Hypotheses and their
effectiveness of Pat model. In the last it make analysis on the limitations of PAT article will be
described in the present report.
AIM AND OBJECTIVES
The Main aim of this research study is to gain cleat understanding of the Positive Accounting
Theory
Objective
 To gain knowledge on the Positive Accounting Theory
 To Know to limitation and identify the significant of PAT
 To make clear understanding of the Positive accounting concepts.
 To understand the effectiveness of article theory and their practical approach.
 To make recommendation on accounting methods which assist in preparing accounting
reports.
RESEARCH QUESTION
In order to make effective research the PAT along with research hypotheses which are
based on the statistical tool. This helps to research to make effective research on accounting
concepts..Through this tool, actual objectives of the research can be achieved (Gunderson and
et.al., 2013). PAT which is considered as the most significant tool because it gives full
information regarding to the actual transaction which take place in business world. It is
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commonly used in the quantitative positive accounting research and null hypothesis is done in
computerized manner. In this present report researcher use hypotheses which is appropriate and
make able to understand the usefulness of the positive accounting theory. As per the discussion,
in this present report facts are totally based on imagination and no one has control on the
imagination (Indjejikian, Matějka and Schloetzer, 2014). This show that accounting figures can
changes any time so mangers need to be prepared have to be prepared for the modification and
modifications should be made accordingly hypothesis. With the help of this hypothesis scholar
draw literature review For conducting research both qualitative and quantitative both the
methods has been used. So is can be concluded that by using different types of methods and
statistical tool helps to reach to make their research more effective. It also helps to make their
hypotheses accurate and authentic. Along with this some arguments are also presents PAT is
not effecting nay transaction and it also considered that very few people have knowledge about
it. But there are some research which make arguments that PAT approach's results are equal to
their other research results.
THEORETICAL FRAMEWORK
PAT is very useful concepts which helps to organization to achieves their significant
objectives. .It concepts includes different concepts innumerable computations, problem solving,
give in dept information in specif format So can be analyzed and interpreted by people. It helps
to them in decision making process (Penman, 2016). To apply this concept on organization is
choice of the manger but apply this concept does not affect pricing and standards which is related
to accounting decisions. In order to make implication of the PAT concepts regulations is the
biggest factor which can influences the overall transaction and financial reports. PAT is
effective financial tool that assists to organization to predicts the accounting practices. This
theory is also consists with accounting standards and their hypotheses. PAT is that concepts
which practice concept on the basis of current situations (Crawford and Lepine, 2013) But it is
not necessary that predication is always right and along with this record are also not make
effective approach in which they need to take model is not making effective practices. The
positive approach to the development accounting relies on the basic assumption that helps to
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policy makers to make effective decision (Waymire, 2014). It assumes that all the decisions that
are being made would be a result of rationally where accountants can follow the best options.
In this report it critically evaluation can be on the basis of prices investors which make
their decisions on the basis on this theory (Penman, 2016) . On the other hand there are some
other accounting theory which give completely different types of direction to the researcher.
There are two types of accounting concepts which can be used by normative or positive
approach. The normative frameworks is conceptual frameworks which is used by organization.
With the help of this theory manager of company can understand ways in which financial
records are modified. There are much research which make strong criticisms on the use of PAT
approach but it is still not loss its significance and also apply by business concern under in many
situations. The aim of this concept is to make concentrates only on the theoretical area and
economic aspects of organizations (Shiino, Stiner and Stiner Jr, 2014)
Sot is can be said that PAT does not focus perception and does not focus on improvement of
accounting practices. The positive approach does not alternatives in the existing approaches or
principles in case they are considered as irreverent. PAT make analysis only existing principles
and make no recommendation for the principles that need to be used. By conducting research it
is found that PAT contain some assumptions for their self interested and there is one other facts
which make nay kind of modification (Waymire, 2014). So it is say that normative approach is
more effective. Thus, it is clear that normative approach presents extremely practical way
methodologies for development and formulation of accounting theories. On the other hand
positive approaches only helps in analyzing and assessment the nature of the methodologies
adopted.
SIGNIFICANCE AND LIMITATIONS OF THE ARTICLE
Limitations of theory
Positive Accounting Theory is considered as the concept that possess various limitations
because of this accurate report could not be prepared by the firm. One of the main limitation of
PAT theory is that lack of prescription influences the implementation of the theory. However,
particular research assesses that it helps scholars to practice positive accounting within firm and
attain desired objectives (Beattie, 2014). With the help of PAT theory it assists in identifying that
no prescription is required in order to implement the model and thus identify the issues related to
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the model. Further. It also evaluates that such theory do not give any detailed information
regarding improvement within the accounting practice and thus helps firm to improve their
performance in market. Thus, through adopting such accounting practice it helps in
implementing theoretical framework so that deficiencies could be identified. Therefore, iti s
essential for businesses implementing PAT theory needs to bring improvement so that desired
objectives could be attained. Thus, proper strategy need to be implemented in regard to adopt
effective accounting theory and thus provide proper solution so that managers of firm could
overcome the same (Bublitz, Philipich & Blatz, 2015). However, if the managers does not
possess effective knowledge regarding PAT than it impacts upon the final report prepared by the
firm. Therefore, positive accounting required to be effectively practices so that lack of interest in
the numerical values impacts upon the implementation of accounting report.
Furthermore, another limitation faced by positive accounting theory is that it is not value
free while it requires certain cost for implementing it within business as it helps in identifying
self interest so that managers of firm faces problem in regard to carry out good accounting
practices. Through the given article on positive accounting theory it helps in developing
fundamental assumption that it does not help firm in accomplishing the study in an effective way
(Glover, 2014). However, it criticizes the researchers view point upon good accounting system
which results in developing self interest so that issues faced could be overcome. There is another
crucial limitation of PAT that it is stagnant and thus it creates issues for business that needs to be
overcome by adopting effective theory so that business could enhance their operations in an
effective way. However, such issues has been prevailing since 1970 but in current time
businesses have been added certain effective accounting system that results in overcoming the
major problems so that best results could be attained. Positive Accounting Theory helps
managers of firm to identify that implementing positive accounting pattern results in overcoming
the issues faced by firm and thus develop appropriate measures and improve accounting
practices (Wang, Che, Fan & Gu, 2014).
Methodology used in the article
Researcher uses several methodologies in regard to carry out study upon positive
accounting pattern and thus selects one methodology from qualitative and quantitative method.
Here, researcher uses qualitative method has been adopted that result in implementing PAT
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theory within study. Further, exploratory research design helps researcher to carry out the study
in regard to implement the PAT theory. All such method results in collecting data and thus
obtains desired outcomes (Dufour, Teller & Luu, 2014). In the present research, descriptive
research deign has been used which results in providing accurate outcomes and helps researcher
to improve the PAT in order to implement good accounting system. Researcher also helps in
supporting the positive accounting theory through using qualitative research method and thus
helps manager in regard to implement positive accounting system and achieves desired results.
However, the main benefit of implementing qualitative tools results in providing accurate
results so that PAT could be effectively implemented. While, implementing such method helps
researcher to support the observation and thus collect the information through looking upon
effective accounting practices implemented within firm. Such research method is considered as
implementing results in obtaining positive outcomes regarding PAT theory and improving
accounting system within firm (Fernando & Lawrence, 2014). Through implementing such
theory it helps in obtaining effective subject and thus obtains knowledge about PAT.
Limitations
There are various limitations faced by researcher at the time of conducting the study upon
positive accounting theory. However, the main issue faced by researcher at the time of
implementing PAT is lack of time. Thus, it is one of the effective issue faced by researcher as
they need to review various articles based upon positive accounting theory (Beattie, 2014).
However, researcher faces issues related to time duration in regard to implement mathematical
formulas. Hence, they are not able to provide accurate results so that possible outcomes could be
attained. Moreover, another limitation faced by scholar is regarding lack of funds. Thus, it is
another major issue that restricts researcher to use the data for using PAT. Hence, these are major
limitations faced by researcher in regard to implement positive accounting theory.
Hence, all the limitation faced by researcher and thus it affects the study. However, it is
essential for scholar to obtain effective results and thus implementing appropriate objectives and
thus PAT could be implemented in an efficient manner. Also, it could be evaluated that
implementing theoretical framework helps in adopting effective approach and thus improve the
PAT within firm in regard to obtain positive accounting (Bublitz, Philipich & Blatz, 2015).
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Further, implementing methodologies helps in selecting qualitative research and thus affects the
actual objectives of study so that desired targets could be attained.
CONCLUSION
From the overall report it could be summed up that PAT theory results in identifying the
positive accounting system and thus through implementing the same it helps in overcoming the
ill effects of accounting within business. Also, it has been identified that PAT theory possess
certain importance as well as limitations. Therefore, it is essential for researcher to overcome the
identified problems and thus improve the performance of firm. Researcher selects qualitative
data in regard to explain the information and test the same.
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