Positive & Normative Accounting Theory Get a Sample Solution

Question: Describe the Report for Positive Normative Accounting Theory. Answer: Introduction The positive Accounting theory refers to the theories that help us to explain and predict the accounting practices that have been followed in by the accounting firms and companies. The positive accounting theories tend to consider the events that took place in the world and based on their interpretation, they convert the same into accounting practices. On the other hand, the approach that has been used in case of normative accounting theories is totally different form that to the positive accounting theories. In case of normative accounting theories, the experts based on the event that has taken place, would provide an accounting solution that needs to be followed in this situation. The positive accounting theory will help to predict the reaction which the companies would have at times when a new accounting standard has been introduced in the market. The positive accounting theory will help to understand the accounting policies that will be adopted by the companies. Executive Summary The positive accounting theory provides an understanding about the descriptive behavior of the accountants. In case of the positive accounting theory, the management of the company tends to use the approach related to the adoption of the accounting policies and standards that increases there probability of survival in the industry. For example: For the companies who are engaged into the contract adopting business would select the accounting policies that minimizes their contract cost and maximizes their profits. These theories at the same time provide an inbuilt flexibility to the managers of the organization to choose an accounting standard that best suited and which is in their own interest. The predictions that the managers took place rotate around three hypotheses. Bonus plan hypothesis: The managers of the organization whose bonus is linked with the performance of the company is likely to choose the accounting standards that help the accountants in the company to shift the future profit that company is expected to realize to the current period. Debt covenant hypothesis: The companies who are more likely to violet the debt covenant, is expected to select the accounting standards that help the accountants to shift the future profit that company is expected to realize to the current period. In this case, the company would be saved from violating the debt covenant. Political cost hypothesis: There is something a possibility that company is likely to face some political cost based on the profit they are earning in the current year. Thus in that circumstances, there exist a possibility that the managers adopt an accounting standard that shift the current year profit to future years just to save the coming political cost. High profit may lead to high taxes and sometimes high regulations as well. (Watts, R., Zimmerman, J) On the other hand, the normative accounting theory is more subjective in nature. The approach that has been followed in this case is not based on the observation that has been noted in the based but based on actually how the accounting process should look like. The researchers in case of normative theory tends to adhere to several different approaches that they consider and based on the same they try to reach out to some opinion which can be helped in reaching out to some possible outcome. The normative theory will help in defining the economic future for the investor as well for the company. As a result of this subjective approach has been introduced in accounting. It has been believed by the accounting experts that the positive accounting theory that has been followed in for farming the accounting polices does not help in developing and improving the accounting practices. Ross L. Watts and Jerold L. Zimmerman were among the first accounting experts who worked together and give evidences towards the theory of positive accounting. Ross L. Watts and Jerold L. Zimmerman in their article Towards a positive Theory of the determination of accounting standards have tried to define the attitude of the management towards the accounting standards. Ross L. Watts and Jerold L. Zimmerman through the help of their article has provided some platform that can be helpful in understanding the factors that are in current date being driving the process of setting accounting standards. The size of the company also affects their opinion towards the standards is also been clearly evident from the article that has been written by the authors. They have stated the rela tion that exists between the size of the company and the process of setting up of accounting standards. The authors through their research exercise have highlighted the irregularities that existed in the accounting practices. In addition to all above, they have discussed and analyzed the concepts that are behind the agency theory, contracting cost theory and political cost. The authors were of the view that the result that would come out from the research work will improvise the development of accounting theory. They have shown the direct relationship between the cash flow and the prices of the shares. Positivism as the paradigm has been used by the author for their research relating to this article. However, the use of positivism as their paradigm has been opposed by many researchers. The researchers have a have a strong belief that for understanding the person it is very important to examine the perception they have for their own activities. Factors that affect the management welfare and their decision regarding the consumption of the main resources were like regulatory, tax, political consideration etc. Another main reason for this discomfort was they believe that it is not possible to segregate the social concept from the people in which it exists. Therefore indirectly, these factors affect the accounting standard setting process. The positive accounting theory has been used by the management of the company in order to choose the accounting standards that tends to report low profit and t the same time help to report high cash flow. But at the same time when the bonus and salary payout of the top management is linked to the earnings or performance of the company, in that case they prefer choosing the accounting standard that helps them to transfer the future profit to the current period. In that case, in case of positive accounting theory, the management of the company based on their need and demand of the situation can manipulate the accounting standards. At times of framing the positive accounting theory, the authors tend to base their results on some assumptions. One of them is the definition of users in relation to the theory. The authors had only considered the impact of such adoption of accounting standards on limited users like listed shareholders, government and creditors. There are several other users such as employees, customers, competitors, advisors which have been ignored. Each user has a separate influence on the firm and they impact the decision of choosing an accounting standard. The assumptions that have been taken in case of positive accounting theory are majorly driven by self interest which makes the difficult as the self interest of one might not be same for the other making the things a bit worse. Further, all the action that has been taken in place by the positive theory will drive through the desire of maximization of wealth which as per many other authors turns out to be negative enough. The assumption that has been taken in the policy is that an organization is a group of self interested people who in collection form a corporate. Further, in the theory, the concept of loyalty and morality has been ignored. All these assumptions took the theory away from the basic need of developing and improving the current accounting practices. In case the organization goes in for the positive theory, the method of accounting that has been selected will be explained in base on the opportunistic or efficiency arguments. Further, it has been argued that behind the positive accounting theory there is no scientific data making it difficult for the experts to justify the core reason behind the policy to get accepted by a wide range. Further, many issues has been brought into picture but there does not seems to have any significant development in regards to their improvement. The three hypotheses which have been put in place by Watts and Zimmerman (1978) under the positive accounting theory are: the bonus plan hypothesis, the debt/equity hypothesis and the political cost hypothesis. By looking at the basic study behind this hypothesis, it is evident that these entire hypotheses that have been are self centered. Thus, the management of the company can use the approach of positive amounting theory for their own good. In that case, it becomes very difficult to establish a portal that can be used to develop and improve the accounting practice as in case of positive theory the accounting practices are changes based on the requirement of the companies. On the other hand, the approach that has been used in case of normative accounting theories is totally different form that to the positive accounting theories. In case of normative accounting theories, the experts based on the event that has taken place, would provide an accounting solution that needs to be followed in this situation. It has been stated that the Normative accounting theory should be the only theory that should be utilized instead. The normative accounting theories provides necessary guidance which can be used in making the section for the accounting policies which can be considered appropriate for the management. The normative accounting theories at the same time can be used to make recommendations on the current practices which can be used to deviate and make improvements in the same. The approach that has been followed case of normative accounting theories is different from the positive accounting theory. The normative accounting theories does not look in what is c urrently being happening in the company but based on the theoretical principles in place they provide suggestions to the policy makers about what needs to be done. Normative accounting theories have been considered to be more deductive process as compared to the positive accounting theory. In case of normative theory, the policies tend to be more specific which not the case is in positive accounting theory. For example: Before the financial crisis that occurred all the financial securities that were owned by the banks were accounted in the similar way as we carry out in case of real estates and other assets of the company. As per the policies, the assets do not required to be revalued and no process was there to consider the current market value. But after the financial crisis that took place, the accounting policy was changed and the polices required the assets to be valued at marked to market at times of each financial statements. As result of this approach, the assets were revalu ed and the associated unrealized gain or loss was moved in to the profit and loss account. This has been regarded as a major change which brought change in the accounting policy as result of the being driven by principle. Both the accounting theories are complementary to each other; the weakness of one is complemented by the other. It has been provided that the positive accounting theory tends to be more practical enough and takes decisions based on what is actually being happening whereas the normative accounting theories is more theoretical in nature and they do not get impacted or affected by the day to day practices. In the current market scenario, it is good to be practical in books for selecting the accounting practices but in reality, the situation is no always the same. The accounting approach and the practices cannot be changed based on the change in the day to day practices. The management of the companies considering the present day situation cannot think of making changes in the approach being it is possible that tomorrow the things might be different and the demand of the situation is the same approach that we have followed previously. Thus, in that case it becomes important to consider the theoretical approach as the same will not be changed based on the change in the day to day practices. (Branchmann S) For a company to carry out an effective financial planning, it is important for the management of the company to consider both the normative as well as the positive accounting theory. Although the normative accounting policies have major stake to play and the accounting experts based considers the financial polices based on the normative statements of accounts. But these statements are based on the financial realities that we have noticed through positive accounting practices. The practices that have been followed in positive accounting theories can be used as a foundation for the normative accounting statements. Being the normative accounting theory has its plus points, still the same has been has criticized at some formats. The normative accounting theory is based on some or the other value judgment which makes the things a bit different. Further, the normative accounting theory does not involve any empirical hypothesis testing. (Fool M) Conclusion In case of normative accounting theories, the experts based on the event that has taken place, would provide an accounting solution that needs to be followed in this situation. On the other hand, the positive Accounting theory refers to the theories that help us to explain and predict the accounting practices that have been followed in by the accounting firms and companies. The positive accounting theories tend to consider the events that took place in the world and based on their interpretation, they convert the same into accounting practices. The management of the company can use the approach of positive amounting theory for their own good. In that case, it becomes very difficult to establish a portal that can be used to develop and improve the accounting practice as in case of positive theory the accounting practices are changes based on the requirement of the companies. The normative accounting theories provides necessary guidance which can be used in making the section for the a ccounting policies which can be considered appropriate for the management. The normative accounting theories at the same time can be used to make recommendations on the current practices which can be used to deviate and make improvements in the same. Considering all these points, it is evident that the normative accounting theory tends to be used for developing and improving the accounting practices. However, it cannot be purely stated that normative accounting theory is the only theory that is required but we, at the same time require some glimpse of the positive theory as well to base the normative accounting statements. References Watts, R., Zimmerman, J., (1990), Positive accounting theory: A ten year perspective,The Accounting Review65, 131-156. Watts, R. L. and J. L. Zimmerman, (1978), towards a positive theory of the determination of accounting standards,The Accounting Review,(January): 112-134. Roychowdhury, S. (2006) Earnings Management through Real Activities Manipulation,Journal of Accounting and Economics42, 335-370. Branchmann S, studio D, Differences Between Positive Normative Accounting, Reterived from Finacebase, https://thefinancebase.com/differences-between-positive-normative-accounting-1663.html , Viewed on 21st Oct 2016 Fool M, What Are the Differences Between Positive and Normative Accounting?, Reterived from Fool.com, https://www.fool.com/knowledge-center/differences-between-positive-normative-accounting.aspx , Viewed on 21st Oct 2016 Accounting scholars, Positive Accounting Theory (PAT), Reterived from Accounting scholars, https://www.accountingscholar.com/positive-accounting-theory.html, Viewed on 21st Oct 2016 Watt R, Positive Accounting Theory (PAT), Reterived from faculty.edu, https://faculty.etsu.edu/pointer/watts%26zimmerman2.pdf, Viewed on 21st Oct 2016 Accounting papers, Positive accounting theory, Reterived from Accounting papers, https://www.accountingpapers.net/positive-accounting-theory.html, Viewed on 21st Oct 2016

Important Pf Free Healthcare Essay Sample

Important Pf Free Healthcare Essay SampleWhen applying for medical insurance, it is very important to understand what you are applying for and when you are applying for it. Knowing what you are applying for and when you are applying, can help you get the best insurance for your needs and help save money by not wasting time trying to figure out what you need from the insurance company.The first step in getting the right health insurance is to fill out an application for Pf. Even if you have a lot of credit card debt, filling out the form for Pf could save you a lot of time.Do not get frustrated by taking more than an hour to fill out the application for Pf. It will take you less than 10 minutes to complete this application form. Save time by getting your information right now.Once you have submitted your Pf application, call your Pf representative and make sure they received it. If they do not, ask them to check their files to make sure they have received your form. It is important th at you are able to access your application immediately after it is completed. Not having it when you need it can cost you a lot of money.The representative can then process your application. A Pf representative can apply for a discount to reduce your premiums, deny your application, or find another way to keep you from obtaining a benefit from the insurance.Don't hesitate to contact the company and ask about the special offers that are available. They might offer you a better deal. Of course, you have to try to get any special offers if you can, but most often they are worth it.Ask if they have any programs for seniors or people withpre-existing conditions. Usually, they do offer special offers for them, but not always. In fact, many health insurance companies have special programs for senior citizens, but not all of them offer these special offers.Many companies do offer special offers for their customers that qualify for Pf. Many of them do have special offers for a while, but som etimes the offers will expire. Be sure to ask if you qualify for the special offers, as well as any other special offers.

A Moment Of Silence In Schools Essays - Prayer, School Prayer

A Moment Of Silence In Schools Essays - Prayer, School Prayer A 'Moment of Silence' in Schools In 1962 the Supreme Court decided that public schools did not have the power to authorize school prayer. This decision made public school in the U.S. more atheistic than many European nations. For example, crosses still hang on the classroom walls in Poland, and the Ten Commandments are displayed in Hungary. There are prayers held at the beginning of legislative and judicial sessions and every President has mentioned a divine power in his inaugural speech. In keeping with a spirit of religious freedom as stated in the First Amendment, there is no reason why students should not be allowed to have a moment of silence during the school day when they can pray or do as they choose. The case Engel v. Vitale in 1962 decided that school prayer is unconstitutional. With this case, it was pointed out that the students were to "voluntarily" recite the following prayer: "Almighty God, we acknowledge our dependence upon Thee, and we beg Thy blessings upon us, our parents, our teachers, and our country." The court ruled that this rule was unconstitutional according to the First Amendment's "establishment clause," which states "Congress shall make no law respecting an establishment of religion." In response to the Engel v. Vitale case some schools adopted a "moment of silence." In 1963, another case was brought before the court dealing with school prayer, Abington School District v. Schempp. The Schempp family challenged a law in Pennsylvania requiring the students to say ten verses of the Bible before school. These readings from the Bible were declared unconstitutional. Members of the board felt reading the Bible would give the children more moral values. The Schempp family strongly disagreed. Members of Congress attempted to find a compromise. From this effort came the adoption of the moment of silence, which is guaranteed by the First Amendment's "Free Exercise" clause. Six states now permit silent moments Georgia, Virginia, Maryland, Mississippi, Tennessee, and Alabama. Silent prayer was ruled constitutional in 1985 as long as it had no religious intent or purpose. (Newsweek, October 3, 1994) Prayer has been banned in schools for thirty-three years. The moment of silence has been ruled constitutional, however. Every student fills a moment of silence in a different way: through song, a prayer, or a memory. - References Newsweek, October 3, 1994, vol. 124. U.S. News and World Report, December 5, 1995 Vol. 117, No. 22, pg. 8-9. The Case of Engel v. Vitale 370 U.S. 421 1962, p. 118-119. Abington School District v. Schempp 374 U.S. 203; 83 S. Ct. 1560; 10 L. Ed. 2d 844 1963, pg. 529-530.

Common Cold essays

Common Cold essays A common cold is an illness caused by a viruse Infection located in the nose.Colds are also involved in the sinuses,ears,and the bronchial tubes. the common cold is caused by any of a number of virusesthat can involve the upper repiratory tract.As your body reacts against the attacking virus you get the symptoms of a cold including nasal congestion,sneezing and shiffles. the best strategy for treating a common cold is to start treatment as soon as there is the recogntion thar a cold is begining and continue treatment on a regular basis until it appers that the cold is over (3-7)days. the other symptoms of a common cold including sneezing, runnynose, nasal odstruction,sore or scratchy throat,coughing,hoarseness and mild general symptoms,like headaches. It deposited into the front of the nasal passages by conaminated fingers or by droplets from coughs and seezes. ...

Pakistan humanitarian needs (Solar energy and Clean water plants) Assignment

Pakistan humanitarian needs (Solar energy and Clean water plants) - Assignment Example There is clear evidence that Islamists are part of political system following the election of Rehman as the leader of opposition. Tribalism is evident by the number of killings in areas occupied by different tribes like Uzbeks and Chechens. Ethno-nationalism is also evident when militants destroyed energy producing station in Balochistan (Gladstone, 120). The author has a number of claims regarding Pakistan as a weak country due to various reasons including failure to protect its citizens. The author has substantial evidences to support the claims derived from undesirable acts from different groups posing threats to the country. After the analysis of the claims, I have effectively understood the humanitarian needs of the Pakistan people. The cruel acts of militants evident after destruction of Kari-Dor Bridge and Sui gas plants have greatly contributed to answering of the research question. This has given me clear insight of the question. The need for clean water plants and the solar energy to improve the well being of the citizens can be derived

Assessment for Taxation Law Assignment Example | Topics and Well Written Essays - 1000 words

Assessment for Taxation Law - Assignment Example A lump sum is subjected to tax on the extent to which it is quantifiable and identifiable as representing reimbursement of income loss. In this case, we shall analyze cases related to this scenario, and try to relate the extent to which the damage that was paid to Nutra Tech Pty Ltd is assessable for tax purpose. Cases and judgments In McLaurin v FCT, the court resolved a case that involved payment of lump sum amount, paid as damages caused by a bush fire on the taxpayers grazing property. 1 This lump sum was a collection of particular items of damage, which were not clearly disclosed to the taxpayer. The court ruled that the distribution was in order after analyzing the details of the case. The decision in this case supported dissection of a payment into several heads and classify some as income and others as non-income, given that the payments is in relation to separate claims, some of which must be liquidated (Nethercott, Devos, & Richardson, 2010). In Van den Berghs Ltd v Clark,2 the judge distinguished capital from income through two tests. One test aimed at establishing whether the contract was part of a fixed framework, that the capital belonged. The other test was to establish whether the contract was purely supplementary to profit-making or a crucial part of the process itself. In this case, the taxpayer entered a contract with a Dutch company, but the contract was terminated and Van den Berghs paid ?450,000 as damages for cancellation of the agreement. The judges held that this amount was capital in nature, since Van den Berghs gave up its right under the agreement. In addition, it was argued that the agreement which was canceled was not commercial in nature, but only affected the manner in which profit-making activities were run. Furthermore, examination of the company’s circumstances exposed that the contract stood for the permanent framework that Van den Berghs run its trade (Nethercott, Devos, & Richardson, 2010). The case of Californian Oi l Products (In Lia) v FC is also related to capital and revenue income. The case was concerned with a taxpayer, who entered into an agreement with a foreign company, which accorded it rights to dispense its oil products in Australia. 3As a result, the oil company terminated the contract and compensated California Oil for the termination. The court ruled that the amount paid as damages for termination of the contract involved ditching a fundamental sole business; hence, the compensation was of a capital nature. In FC of T v CSR, it was decided that capital gain tax provisions, were applicable if the taxpayer obtained a lump sum in exchange of damages for breach of contract. In regard to Income Tax Assessment Act, 118-20, which is related to CGT taxing powers relationships to the rest of the provisions, the capital gain would be reduced if the amount was assessable income, as stipulated in sections 20-25(4) (CCH Australia Limited, 2009). Application of the cases To establish whether t he damage received by Nutra Tech Pty Ltd is of capital or income nature, it is important to consider whether the terminated agreement, which was related to consultancy services, was associated to its profit-making activities. If Nutra Tech Pty Ltd could be able to obtain another contract to replace the terminated one, then it can be held that the agreement did not obstruct Nutra Tech Pty Ltd’s profit-making act

First Opium War Essay Example for Free

First Opium War Essay In 1899, right after the First Opium War, China was under the control of European powers and Japan, Qing Dynasty was so weak that hardly could defeat these powers. Each of these powers found out that China was a country which owned variety of resource. Therefore, all of them wanted to trade with China to earn more benefit and robbed various parts of coastal places, unfold Chinese territorial and Administrative integrity and would not interfere with the free use of the treaty ports within their spheres of inference in China. John Hay, the private secretary to Abraham Lincoln, the person who proposed the Open Door Policy. At that time, the United States was just finished the invasion of Philippine with Spanish and turned to China. They also had great interest in China and found out that China was the biggest market in the whole world. The Open Door Policy was declared base on this situation. Hay said,â€Å"Earnestly desirous to remove any cause of irritation and to ensure at the same time to the commerce of all nations in Chinashall enjoy perfect equality of treatment for their commerce and navigation within such spheres.† The purpose of writing the document was to reduce the power countries had gained from their spheres of influence. The United States had no spheres of influence in China because it had just recently taken interest in Asia. Therefore, John Hay sought to prevent other countries from having more power than the United States. Each power claimed exclusive privileges of investment, and other powers seek to monopolize the trade as well. As the Open Door Policy took into action, each power should have to follow the rule 1. Each great power should maintain free access to a treaty port or to any other vested interest within its sphere. 2. Only the Chinese government should collect taxes on trade. 3. No great power having a sphere should be granted exemptions from paying harbor dues or railroad charges. This policy which showed above has obviously changed both China and the United States. From the United States, they found the biggest market in the whole world which is China. Before America was unable to trade with China and didn’t have time to care about China. No later than they defeated Spain in Philippine. They turned their sight to China, a huge market for trade which had been untapped and allowed America to gain a financial foothold in China. This decision can give them earn the most benefit. United States became China’s largest partner. Therefore, although the tax they need to pay was as the same as all the other powers, they occupied the most market of China, which means they were the largest earner between China and European power. By the way, it was the first time for the United States to expend their market to Asia. It has laid a good foundation for the commercial intercourse between America and China several decades later. On the other hand, this policy has changed China a lot, even much more than America. During that period China was nominally controlled by Qing Dynasty, but actually almost half land of China was invaded by foreign country and divided by France, German, British, Italy, Russia, Japan, and the United States, we call these eight countries as Eight-Power Alliance. Anyway, China was a country with half colonization and half feudalism. Each power was interested in the huge benefit in China. But they all had a fear with others. None of them dared to become the first. As the Open Door Policy proposed by America, the entire problem has been solved. Everyone got the same right to trade with China and had to pay the tax. It looks like everyone received what they want except China. However, just the opposite, China has occupied a huge change during this period. First, it has increased the trade of China and help to develop the economics of China. After the First Opium War, that was the weakest period of China. Drug has poisoned this huge country suffer from paining. Open Door Policy gave China a chance to develop them. Second, this policy gave China to advocate an impartial system of taxation set up a system of equal trading rights, which also helped to prevent European Power and Japan divided China into separate colonies, also intended to lower taxes and gave America an equal chance to trade with China. Third, the United States was the biggest partner effectively stopped countries from colonizing China; this helped to keep China a united, sovereign nation. In recent years, China has developed much faster than before. In 1978, the president Deng Xiaoping took office, China formally cooperated with America. It can be said as America helped to increase China’s economic. The development of trade gives both China and America pretty much benefit. Finally, the Open Door Policy is the most important policy during the whole that period. Without that policy, maybe China would be divided into several parts. Open Door Policy give America more benefit, but actually the biggest earner is China.