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I.Dwinanto Bimo
Email : idbimo25@yahoo.com

○ Presentation
○ Paper
○ Discussion
○ Assessment : Mid test (30%), Final Test
(35%), paper (30%).
○ Reference : Accounting Theory : Jayne
Godfrey, Allan Hodgson, Scott Holmes, 7th
○ Introduction
○ Accounting theory construction
○ Conceptual framework
○ Measurement theory
○ Accounting Measurement system
○ Asset
○ Liabilities
○ Equity
○ Revenue
○ Expenses
○ Positives accounting Theory
○ Capital market research and the efficient markets
○ Accounting Research
○ Why it is important :
○ Chambers :
Accounting has frequently been described as a body
of practices which have been developed in response
to practical needs rather than by deliberate and
systematic Thinking.
○ Accounting practices have multiple demands such
as managers and employees, investors, creditors,
taxation, legislative authorities and society in
general. So, who should financial accounting reports
serve? who are the primary users of accounting
information? We call this the 'objective problem' -
the problem of determining the objective of financial
Examples of uses of accounting

○ Theories might:
– prescribe how assets should be valued
– predict why managers will choose particular accounting methods
– explain how an individual’s cultural background affects accounting
information provided
– prescribe what accounting information should be provided to
particular classes of stakeholders
– predictthat the relative power of a stakeholder group will affect the
accounting information it receives
– explain or predict how accounting disclosures might be used as
part of a strategy to legitimise the operations of an organisation
Accounting Theory

○ Theory is a set of ideas used to explain real-world

○ Hendriksen :
1. . . . the coherent set of hypothetical, conceptual and
pragmatic principles forming the general framework of
reference for a field of inquiry.
2. . . . logical reasoning in the form of a set of broad
principles that (1) provide a general framework of
reference by which accounting practice can be evaluated
and (2) guide the development of new practices and
Accounting Theory

○ Whether the theory is accepted depends on:

○ how well it explains and predicts reality.
○ how well it is constructed both theoretically and empirically.
○ how acceptable are the implications of the theory to a body
of scientists, professionals and society as a whole.
Accounting Theory

○ It is important to understand that accounting theory

are :
○ not simply an abstract process.
○ not divorced from reality. In fact, its main
objectives are to explain why and h ow current
accounting practice evolved, to suggest
improvements, and
○ to provide the basis for developments in such
Pre-theory (1400s – 1800)

○ Goldberg:
No theory of accounting was devised from the time of
Pacioli down to the opening of the nineteenth century.
○ Growth of the business sector increased the demand for
detailed accounting information, for improved
techniques, and for accounting practices such as
depreciation which addressed the long-term nature of
Pragmatic accounting (1800-

○ The ‘general scientific period’

➢ based on empirical
observation of practice
➢ provided an explanation of
accounting practice
➢ focused on the existing
‘viewpoint’ of accounting
Normative accounting (1956-1970)

○ accounting theorists attempted to establish 'norms' for

'best accounting practice.
○ Edwards and Bell (1961) and Chambers (1966), less
concerned about what actually happened in practice and
more concerned about developing theories that
prescribed what should happen.
○ During this period, the debate was predominantly about
measurement rather than the actual practice of
recording and reporting information.