Essay on accounting theory

5630 Words Oct 3rd, 2014 23 Pages
TUTORIAL 1 – Semester 1 2014
Deegan Topic 1
Introduction to financial accounting theory

1.1 What is the difference between a positive theory of accounting and a normative theory of accounting?

1.6 The IASB and the FASB are currently developing a revised conceptual framework of financial reporting. If you have been asked to review the framework—which is an example of a normative theory of accounting—why would it be important for you to pay particular attention to how the objective of financial reporting is defined within the framework?

1.8 What is the difference between developing a theory by induction and developing a theory by deduction?

1.9 Is the study of financial accounting theory a waste of time for
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Likelihood of regulatory capture is a risk to which an agency is exposed by its very nature. This suggests that a regulatory agency should be protected from outside influence as much as possible. Alternatively, it may be better to not create a given agency at all lest the agency become victim, in which case it may serve its regulated subjects rather than those whom the agency was designed to protect. (161 words)

3.19 What assumptions are made about the motivations of the regulators in:
(a) the public interest theory of regulation?

Ans) Public interest theory is an economic theory that holds that regulation is supplied in response to the demand of the public for the correction of inefficient or inequitable market practices. Regulation is assumed initially to benefit society as whole rather than particular vested interests. The regulatory body is considered to represent the interest of the society in which it operates rather than the private interests of the regulators.

(b) the capture theory of regulation?

Ans) Regulatory capture is a form of political corruption that occurs when a regulatory agency, created to act in the public interest, instead advances the commercial or special concerns of interest groups that dominate the

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