Accounting Theory Of Accounting

The significance of this article stems from the necessity of making the infrastructures of accounting knowledge more scientific. The infrastructures which would be the bases of assumptions, principles, and concepts of accounting knowledge. Only via making these infrastructures scientific, one can promote the status of accounting among other sciences. In addition, without any justification, reasoning, and argumentation, one cannot have scientific claims. The theory of accounting should ultimately enable the standards setters to deduce the standards. Considering the impact of accounting theory on standard setting, this article aims at analyzing the point that whether the type of reasoning applied in developing accounting theory and setting accounting

The observations of financial data of a number of companies is meticulously studied and their similar characteristics are found by one 's mind. If the data have repetitive relationships, then some principles can be formed and in some cases new thoughts can be induced. If the observations are not influenced by current principles and actions, more innovative thoughts can be induced. For example, based on historical data, the ratio of received cash to sales in several companies related to the same industry might suggest a certain trend. Based on this ratio, we can predict the future cash revenues. This idea is falsifiable. In other words, the macro economic factors such as inflation rate, the volume of the liquidity, the interest rate of bonds, and GDP might affect the trend of the cash to sales ratio in industry and the future revenue collection might not be predictable based on the past trend of sales (Saghafi,

The deductive approach can be explained using the assumption driven from theory. In other words, the deductive approach includes deducing the results from the premises. When a deductive method is applied for a research project, the author formulates a set of assumptions that need to be tested and then, using relevant methodology, tests the assumptions. Deductive reasoning has specific characteristics that must be understood. If the premises of deductive reasoning are accepted, then, the result must necessarily be accepted. In a deductive reasoning, the contents of the result are implicitly stated in the premises, making such argument a non-ampliative one. If new premises are added to the argument, then the result must still follow them. A deductive argument is either valid or invalid and there is no degree of validity. There is no choice or decision in applying such argument and no judgment is necessary for getting the result and