Finance and Accounting - Essay Example

?Accounting Research Essay Table of Contents Part A 3 Part B 4 Literature Review 4 Normative Approach In Current Economic Environment 8 Normative Approach In Current Business Environment 10 Positive Approach in Current Economic Environment 11 Positive Approach in Current Business Environment 12 Whether One Approach Can Be Deemed To Be Preferable To The Other 12 References 14 Part A Normative approach, the term, was first applied by Adrian Holliday, in the year 1994, which signifies the study of culture. The studies referring this approach view beliefs for Service Level Agreement (SLA) indicating the future behaviour of the students as well as effective learners. The study related to normative approach enables to provide a description along with classification of the types of beliefs related to SLA (Holliday, 1994). The normative approach comprises studies which include beliefs, methodologies, and relationship among actions along with their advantages and disadvantages (Kalaja & Barcelos, 2006). The normative approach can be beneficial to accounting as a new diversified research approach emerges with the approach, which would enhance the position of accounting research along with accounting theory (Coetsee, 2010). However, the normative approach disappoints to illuminate credible understandings regarding problems related to accounting practices for social and economic factors. It is also concerned with the development of normative theories which impose standards based on theories related to quality information and relevant information about the consequences of conventional accounting system. It also reflects certain facts related to inefficiency of comparability among various financial statements due to a variety of alternative rules related to accounting. Moreover, normative accounting theories replicate various actions and processes that are approved by accountants in order to accomplish the desired goals or objectives (Banerjee, 2010). A positive approach can be defined as a determinant through which critical situations or crisis circumstances can be ignored by driving the opportunities to an expected higher level. The positive approach can also be determined through a positive drive. Positive approach also promotes the failure and success of an organisation as well (Barber, 2011). The role of accounting in positive approach can be described with respect to accounting aspects, role of accountant and impact of accounting on resources as well as people. Moreover, the approach is structured on the basis of proposition for regulators, shareholders and managers for maximising the utility. The approach is completely opposite to normative approach (Womlib, 2001). Part B Literature Review According to the observation of Belkaoui (2004), in the context of normative approach, it can be stated that accounting in relation to descriptive approach can be critically evaluated through normative methodology. Normative accounting theory justifies what should to be done rather than what it is. It can be viewed that in the professional field of accounting, a belief is widely apprehended that accounting is considered as an art which is not formalised. Furthermore, it also entails methodologies used in traditional aspects that can be considered in the establishment of accounting theory. It also justifies these facts that by coding of accounting practices. Moreover, in the context of oversimplifying, the complex nature of accounting phenomena and issues can be identified which are essentially required in order for formulating accounting theory. The methodology of normative approach can be considered in order to validate a few of the accounting practices that are required to be approved. It can be stated that among the studies provided in normative approach, Moonitz and Sprouse deserve special mention. Normative accounting theory emphasises on reference theory, thus enabling an appropriate way of making the prediction of various accounting phenomena, along with evaluating interactions amid accounting variables in the functions of real world. Normative accounting theory helps in justifying the most reliable and appropriate accounting process that is intended with a purpose (Belkaoui, 2004). In the context of positive approach, it can be evidently stated that accounting theory should estimate and describe accounting phenomena, through the verification of the theory. It can also be stated that positive approach that has been adopted in the context has gained importance in the aspect of accounting theory. Moreover, the methodology adopted in this scenario is essentially inductive in nature. It can be mentioned that accounting theory can be appropriately handled when there is a result of both the theory construction as well as theory verification process. In this similar context, it can be stated that accounting theory is to be predicted and explained on the basis of the occurrence of the phenomenon and verification of the theory. As observed by Womlib (2001), it can be stated that accounting theory can be beneficial in exploring the information gathered along with its future directions. It also should be beneficial for the society by taking into consideration the expansion of the theory in the fields of technology. It should be also emphasising on the interest of the community along with regulation and construction measures (Womlib, 2001). In the context of positive approach, it can be apparently viewed that positive approach can be appropriate for an organisation which incorporates computerised working procedure. According to Lohrey (2013), for instance, in an organisation having computerised technologies, time taken for setting and implementation can be considered as significant issues. In such cases, positive approach can be determined as important for proper conduction of the process. Positive approach in the form of effective accounting system can also be considered as important aspects (Lohrey, 2013). According to a report by Accounting Scholar (n.d.), it can be estimated that positive accounting theory can be considered appropriate when for instance, managers of an organisation possibly select a few of the procedures of accounting through transforming the reported earnings from future to the current periods. With this application, it would be possible to make assessment and consequent increment of the bonuses for the present year for employees and management of organisation. However, with the application of the hypothesis of debt covenant, its violation can be identified based on accounting theory by the management which enables the managers to choose the procedure of accounting that would be appropriate for maintaining the reported earnings for projecting the future based on the present interpretations. It can also be stated that with the increment of present earnings, there would be limited violation of debt covenants as well as reduction of constraints assisting in the accomplishment of the goals and objectives of the organisation. In the context of political cost hypothesis, it can be stated that with the greater emergence of political costs in an organisation, the managers can possibly choose accounting procedures for complying with the reported earnings from present to future duration. It can also be stated that increased profitability results in greater political dimensions along with emerging regulations and taxes for bigger organisations for higher standards of reporting. Moreover, positive accounting theory can be accomplished in a business organisation through alteration of accounting policies, management of discretionary accruals, scheduling for incorporation of emerging standards of accounting along with Research & Development (R&D), maintenance and repair among others (Accounting Scholar, n.d.). In the context of normative approach which views on beliefs, methodology and other important aspects, it can be stated that it can provide emphasis on the recognition and the assumptions on the issues of measurement in the process of accounting. Normative accounting theory is essentially based on the assumption which reveals the way the process of accounting should be carried out. According to Banerjee (2010), normative accounting theory illustrates the practices and the principles that are required by the accounting firms for adopting the process of accounting in order to maintain solidarity in the process of business execution. Normative accounting approach can be apparently found appropriate, for instance, with the introduction of the Current Purchasing Power (CPP) method as well as Current Cost Account (CCA) method. However, in the traditional period, money was considered as the only unit of measurement through which relevant information can be gathered for preparing various historical data. The approach can be appropriate in finding the problems relating to the process of accounting which is needed to be examined in order to provide guidance to the employees subscribed in the accounting process. It is also necessary for the organisations to handle such grievances in the accounting process with the normative approach and its methodology which would enable the organisation to monitor the process of executing the accounting system effectively. Moreover, with the application of the approach in the accounting, it assists in transaction process of business. Moreover, in reference to the conduction of statements of accounting, normative approach can prove to be beneficial for an organisation in handling such significant work process (Banerjee, 2010). Normative Approach In Current Economic Environment In reference to normative approach in the current economic environment, it can be identified that it emphasises on the necessary aspects that are needed to be carried out in terms of decision making aspects. The normative approach rather focuses on illuminating certain effective solutions after revealing economic situations. The normative approach can be applied while settling on wages in the economic context. Where, every aspect should have a balance ratio in terms of activities performed by the employees and the amount of money paid to them. In the context of employment, people should react according to the situation. In the context of current economic environment, Muthukrishnan (2010) stated that on the basis of economic front, market forces have emerged quite faster as compared to the budget constraints in the global context. It has been essentially observed that in the context of economic environment, as mentioned earlier, wages play a significant role in determining the economic aspects. Moreover, proper wage determination to the workers in an organisation entails greater productivity in the economic aspects of the nation along with production process of the workers in the organisation. It can be apparently viewed that with the normative approach, governmental policies are strategized for controlling the market and maintaining the value of the products (Muthukrishnan, 2010). The normative approach facilitates in identifying problems in the environment such as air and water pollution along with emission of toxic materials. However, it can also be stated that economics consists of two types of determinants which include micro and macro. In reference to micro-economics, it reveals the study of the use of resources along with wages supplied to the workers. On the other hand, macroeconomics can be related with the aspects of population, poverty and international trade issues among others. Furthermore, the normative approach relies on the usage of resources in the economic context, which assists in the proper functioning which enables organisation to attain greater productivity along with maintaining the economy of the overall environment by a considerable extent. Muthukrishnan (2010) further emphasised that the governmental role has increased to a significant level regarding the safeguard of the environment as well as different legislations along with tools in order to protect the environment. Moreover, the normative approach also determines the increasing growth in the economic aspects which can also be considered to be significant (Muthukrishnan, 2010). From the above mentioned aspects, it can be comprehended that economic environment describes about various elements in the micro and macroeconomic context which can be appropriate as in the current context economic aspects rely mostly on governmental interventions which can be considered as one of the essential factors while determining economic factors. According to a report of OECD (2004), normative approach can be maintained through a framework of analysing the economic policies for the maintenance of the sustainable economy of the nation. It also propounds various issues relating to the public policy which also conceive similar importance in the context of economic background (OECD, 2004). Moreover, the report of OECD (2004) stated that normative approach can be apprehended based on beliefs that also refers to the methodology provided in the aspects of economic context. In addition, normative approach, in the economic context can be described on the basis of the usage of the social factors such as land, money and technology which are important in the context of economic development of a nation. It also reveals the fact that violations of regulations can be considered as significant. Moreover, normative economics also identifies certain facts that determine some aspects of models related to environmental policies. In this context, it can be apparently viewed that these models monitor both penalty and probability that are constituted in the variables of various political actions for increasing the prevention from regulation aspects. For instance, with the increment of the monitoring probability, enhancement in the frequency of the policies can be observed through the application of technologies in policies requiring limited evidences in terms of monetary and non-monetary agreements. Therefore, it is required to implement such environmental policies where the societal aspects can be beneficial and violation of such policies and rules are diminished in order to protect the environment free from unethical practices which could hamper the environment by a significant extent. It can also be stated that normative disciplines also provide implications regarding the welfare of the organisation through economic efficiency of the cost benefits as well as protection of the environment from pollution and other social measures. The approach would help in protecting the environment as well as supporting for the benefits of the people in the society (OECD, 2004). Normative Approach In Current Business Environment In the context of business environment, it can be stated that normative approach implies certain strategic planning along with situational analysis which usually lead to the determination of the direction of strategies as well as choices of particular strategies. It can also be stated that business environment can be determined as a compilation of critical forces that relate to every feature of the corporation. This includes technologies, systems, processes and products. It is merely a continuous process which has neither a starting point nor the ending point. Rainey (2010) stated that many organisations react according to the situation of certain external determinants which are controlled by the wishes of the employees along with the management of an organisation for the attainment of objectives of the organisation. It can also be apparently stated that the approach is appropriate while taking into consideration various logical understandings in the scientific basis where theories and observations are given utmost importance, permitting different organisations to use informed judgments regarding the consideration of certain facts. Moreover, it can also be appropriate where unanticipated developments are more certain to happen. It is also an approach where a combination of information, data and analysis are taken into consideration in order to arrive at certain decisions regarding approaches and methods (Rainey, 2010). Positive Approach in Current Economic Environment As observed by Oseni & et. al., (2011), the positive approach in relation to economic environment can be considered on the basis of the facts identified in fulfilling the objectivity of the approach through the amount of labour given in performing an activity. Moreover, positive approach deals with the activities that are needed to be carried out. The positive approach also emphasises on the field work and analysis which could be beneficial for decision making process. The appropriation of the approach can be stated through the main points in the positive approach relating to accounting in the context of economic environments which can be further described on the basis of estimation and explanation of selection of standards. The process of accounting theory assists organisations through the analysis of costs and benefits of specific disclosures in the financial aspects with regard to the relationship amid individuals as well as resource allocation in the current economic environment. Moreover, the economic relationship of various organisations are considered to be significant and appropriate while measuring the performance of the economy along with the employees in organisations as well as in societies (Oseni & et. al., 2011). Positive Approach in Current Business Environment In reference to the positive approach related to the business environment, it can be stated that the changing dimensions of the business environment has influenced governments to alter the policies for industries and trade for making the business field competitive. However Prasad (2005) stated that liberalisation has also created an impact on the business attributes in order to control the business to sustain in the global context. Contextually, it is observed that positive approach is appropriate in the aspects of controlling governmental interventions for organisations in the modern day context as well as in the promotion of national heritage within various countries irrespective of caste and creed along with uplifting the social class through various business commitments in the organisations by the management (Prasad, 2005). Whether One Approach Can Be Deemed To Be Preferable To The Other In the context of accounting theory, it can be stated that both positive and normative approaches are significant in understanding differing circumstances. Positive approach is based on the application of the certain valuable data through the verification of the theory as compared to normative approach which reveals what is needed to the carried out in performing certain activities in an organisation. Oseni & et. al., (2011) further stated that the positive approach deals with the philosophy of science on the absolute manner than on other aspects whereas normative approach deals with the beliefs and methodologies of the different aspects. Therefore, it can be said that positive approach can be preferred mostly in current business context in order to generate extensive profits for organisations that are seeking to attain a good and reliable method (Oseni & et. al., 2011). References Accounting Scholar, No Date. Positive Accounting Theory. The Three Hypotheses of Positive Accounting Theory. [Online] Available at: http://www.accountingscholar.com/positive-accounting-theory.html [Accessed March 26, 2013]. Barber, H. C., 2011. Charging Your Mind-Set: The Empowerment of Positive Thinking. Tate Publishing. Belkaoui, A. R., 2004. Accounting Theory. Cengage Learning EMEA. Banerjee, B.K., 2010. Financial Accounting: Concepts, Analyses, Methods and Uses, 1/e. PHI Learning Pvt. Ltd. Coetsee, D., 2010. The Role of Accounting Theory in the Development of Accounting Principles. Meditari Accountancy Research, Vol. 18, Iss: 1, pp.1 – 16. Holliday, A., 1994. Appropriate Methodology and Social Context. Cambridge University Press. Kalaja, P. & Barcelos, A.M. F., 2006. Beliefs about SLA: New Research Approaches. Springer. Lohrey, J., 2013. What Are the Negative & Positive Impacts of Computerizing an Accounting Department? Positive Approach. [Online] Available at: http://smallbusiness.chron.com/negative-positive-impacts-computerizing-accounting-department-31404.html [Accessed March 26, 2013]. Muthukrishnan, S., 2010. Economics of Environment. PHI Learning Pvt. Ltd. OECD, 2004. Economic Aspects of Environmental Compliance Assurance. The Normative Environmental Economics View. [Online] Available at: http://www.oecd.org/env/outreach/37719119.pdf [Accessed March 26, 2013]. Oseni, A. I. & et. al., 2011. Accounting Theory Formulation as a TOOL for Enhancing International Harmonization of Accounting Standards. Journal of Innovative Research in Management and Humanities, Vol. 2, No. 1, pp. 1-14. Prasad, K., 2005. Strategic Human Resources Management: Text and Cases. Macmillan. Rainey, D. L., 2010. Sustainable Business Development. Cambridge University Press. Womlib, 2001. Accounting Theory and Conceptual Frameworks. Positive Approach. [Online] Available at: http://womlib.ru/book/Accounting_Theory_And_Conceptual_Frameworks.pdf [Accessed March 26, 2013]. Read More