1. Prepared by Arabella Volkov
University of Southern Queensland

2. References
Text – Chapter 2
Theory and Method

3. Learning Objectives
At the conclusion of this lecture, you should have an appreciation of:
why there are different types of theories of accounting
the difference between deductive and inductive approaches to theory development
the importance of syntax, semantics and pragmatism in developing and evaluating theories

4. Learning Objectives
At the conclusion of this lecture, you should have an appreciation of:
the difference between dogmatic, self-evident and scientific tests of the ‘truthfulness’ of theories
how scientific theories are developed and tested and how they progress

5. Imposing order Accountants often need to impose some sort
of order on imprecise events and transactions
Exercise appropriate judgement
Analyse the financial implications of transactions
Assess the impact of transactions
Establish the legal entitlement
Calculate the current value

6. A range of accounting theories
Accounting as:
a historical record
a language
intracorporate politics
standards setting as politics

7. A range of accounting theories
Accounting as:
mythology
magic
communication-decision information
an economic good
a social commodity

8. A range of accounting theories
Accounting as:
ideology and exploitation
a social club

9. Theory formulation What is a theory?
a deductive system of statements of decreasing generality
nets cast to catch the world…
Logical flow of argument leading from fundamental assumptions and connected statements to final conclusions

10. Theory formulation How are theories formulated? Deductive Inductive
reasoning from general statements to specific statements
Inductive
reasoning from the particular to the general

11. Theory formulation Formulating a theory
Epistemology – the study of the acquisition of knowledge
Accounting theorists have drawn on the natural sciences
Accounting:
Social science
Measurement and technical process
Scientific or naturalistic method?

12. Parts of a theory Syntactics: Rules of the language used
Syllogism: set of premises and conclusion
Premise 1: All accounts relating to assets have debit balances.
Premise 2: The accumulated depreciation account relates to
assets.
Conclusion: The accumulated depreciation account has a debit balance.

13. Parts of a theory Semantics:
Links the basic concepts of a theory to objects in the real world
Premise 1: All asset accounts have debit balances.
Premise 2: The sales returns account is not an asset account.
Conclusion: The sales returns account has a debit balance.

14. Parts of a theory Pragmatics:
The effect of words or symbols on people
Accounting should provide useful information for decision making to certain interested parties

15. Testing a Theory Criteria of truth: Dogmatic basis Self-evident basis
‘believe what we read’
Self-evident basis
reasonableness
Scientific basis
Syntactics and induction

16. Empirical Accounting Research Program
Testing a Theory
Empirical Accounting Research Program
Theory plane
2. Develop
theoretical framework
3. State
hypothesis
4. Construct
research design
5. Observe
1. Identify
research problem
6. Analyse
8. Assess limitations
and constraints
7. Evaluate
Observation plane

17. Testing a Theory Criteria of truth Scientific basis
Popper and falsification
Research programs
Kuhnian paradigms or disciplinary matrices
Feyerabend’s approach

18. Summary A number of conflicting theories have developed
A theory generally consists of three parts
There are several criteria for judging a theory
Persuasiveness of evidence

19. Key terms and concepts Theory Natural science or Social science
Deductive
Inductive
Syntax
Semantics
Pragmatism

20. Where to get more information
Other courses
List books
Articles
Electronic sources