2. ACCOUNTING THEORY Hashemite University Dr Husam Al-Khadash 1

3. CHAPTER 1 THE DEVELOPMENT OF ACCOUNTING THEORY 2

4. Introduction What is theory? What is the relationship of accounting research to accounting theory? 3

5. Accounting Theory Defined

6. Accounting theory is somewhat like a cloud, i.e. not well-defined. Accounting Theory Structure of Accounting Theory Informal Approach

7. Accounting Theory and the need for accounting framework Accounting theory framework Accounting research Accounting practice 6 STANDARDS PRINCIPLES ASSUMPTIONS © 2010 Dr Husam Al-Khadash-

8. Accounting in practice is Communication Measurement 7 Recognition © 2010 Dr Husam Al-Khadash-

9. Research Methodology Deductive approach Inductive approach Scientific Method 8

10. Deductive Approach Begins with the establishment of objectives Next definitions and assumptions are stated A logical structure for accomplishing the objectives based on the definitions and assumptions is developed Attempts to “theorize are generally based on the deductive approach 9

11. Inductive Approach Making observations and drawing conclusions Generalizations are made about the universe based upon limited observations 10

12. The Scientific Method Involves the following steps: –Identify and state the problem to be studied –State the hypotheses to be tested –Collect data necessary to test the hypotheses –Analyze and evaluate data –Draw a tentative conclusion –Most accounting research found in academic journals uses the scientific method 11