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Accounting Theory

Accounting theory is a set of frameworks and methodologies used to study and apply financial reporting principles by reviewing historical accounting practices and how current practices are regulated. There are three main accounting theories: the accounting structure theory, interpretational theory, and decision-usefulness theory. Understanding accounting theory provides benefits such as bringing logic to accountant decision making, developing better accounting approaches, increasing efficiency, reducing ambiguity, justifying practices, facilitating tax preparation and audits, and fulfilling information needs of interested parties.
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0% found this document useful (0 votes)
853 views

Accounting Theory

Accounting theory is a set of frameworks and methodologies used to study and apply financial reporting principles by reviewing historical accounting practices and how current practices are regulated. There are three main accounting theories: the accounting structure theory, interpretational theory, and decision-usefulness theory. Understanding accounting theory provides benefits such as bringing logic to accountant decision making, developing better accounting approaches, increasing efficiency, reducing ambiguity, justifying practices, facilitating tax preparation and audits, and fulfilling information needs of interested parties.
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Accounting Theory

Accounting theory is a set of assumptions, frameworks, and methodologies used in the study and
application of financial reporting principles. The study of accounting theory involves a review of both the
historical foundations of accounting practices, as well as the way in which accounting practices are
changed and added to the regulatory framework that governs financial statements and financial
reporting.

CLASSIFICATION OF ACCOUNTING THEORIES


Accounting Structure’ Theory

‘Interpretational’ Theory

‘Decision-Usefulness’ Theory

Need
Benefit of Accounting Theory
The acquaintance to accounting theory gives following benefits:

 It helps in bringing logic in decision-making of accountants.

 It helps in developing better accounting approach among accountants

 It helps in increasing efficiency of accountants.

 It helps in reducing ambiguity in accounting practices.

 It helps in justifying accounting practices with logic.

 It helps in preparation and adherence income tax and at the economic laws.

Facilitates auditing of accounts easily.

 It helps in framing of accounting policies and procedures.

 It helps in fulfilling various information needs of interested parties in a better way.

 It helps in bringing out accountant from the dilemma of selection of various alternatives.

 It helps in better interpretation and understanding of accounting information provided by accounting


documents.

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