Accounting Theory chapter 1

1

Which of the following statements is correct in relation to the purpose of theory?

They make suggestions and dictate what action must be taken
All theories do the same thing
Some theories explain, while others describe what is happening
Theories only make predictions about what will happen in the future approach.

2

Accounting theory can be described as:

A set of facts, specific in nature, against which accounting practice can be evaluated
Being based only on observations
Description, explanation or prediction of accounting practice based on observations and/or logical reasoning
Being irrelevant to the development of new practice and procedures

3

Which of the following statements is correct?

It is impossible to assess the appropriateness of a particular theory
A theory can only be useful if it is correct
A theory does not have to be correct to be useful
If there is a theory about something, it must be correct

4

Is it possible to have different theories on the same topic?

No, there can only ever be one explanation or solution
Yes, there are often many alternative theories on a topic because there are usually many possible explanations and/or solutions
Yes, but there is usually only one explanation and/or solution
No, it is impossible to have alternative theories on a topic

5

An example of how theory can predict accounting practice is:

Asset recognition theory
Corporate social responsibility theory
Agency theory
Capital market theory

6

An example of how theory can help to identify problems and deficiencies with current accounting practice and improve accounting practice is:

Corporate social responsibility theory and the conceptual framework for accounting
Agency theory and the conceptual framework for accounting
The conceptual framework for accounting
Corporate social responsibility theory

7

How can theories be of benefit in accounting?

They assist us in describing and explaining current accounting practice only d. they assist us to predict and improve accounting practice
They assist us to improve accounting practice and they provide principles to take into account when taking action or making decisions
They help to identify problems and deficiencies with current accounting practice but do not assist us in improving accounting practice

8

Which of the following is an example of a positive theory?

Fair value should be used to measure assets in the financial statements, so as to provide more relevant information
The conceptual framework for accounting
Cost should be used to measure assets in the financial statements because it is more reliable and accurate
A theory that explains why managers prefer or choose particular accounting methods or policies over others

9

Deduction can best be described as:

The process of moving from particular instances of something to a general conclusion
Coming to a conclusion through a process of elimination
The process of developing specific predictions from theories
The process of developing numerous conclusions or theories

10

Which of the following statements is incorrect, in relation to the scientific method?

It involves making predictions that are tested by further observations
It involves starting with a limited number of observations
It involves starting with a large number of observations from which a reliable conclusion can be drawn
It involves analyzing observations to derive a theory

11

A normative theory is one which:

Prescribes or makes recommendations as to what should happen
Describes or explains what is currently happening
Predicts what might happen
Is often referred to as an empirical theory

12

Which of the following statements is correct in relation to normative theories?

Normative theories are not likely to evolve from the consideration of positive theories
Normative theories always evolve as a consequence or result of positive theories
Facts about current accounting practice are not considered in the development of normative theories
Normative theories often evolve as a result of research performed in relation to positive theories

13

A reason why someone may accept a theory without having 'first hand' or direct knowledge of the topic are:

Evidence exists that refutes the theory
Other people choose not to accept the theory
The theory makes sense and fits with personal experiences and beliefs
Lack of knowledge regarding the authority of the source of the theory

14

A theory can be proven to be true:

Regardless of how many observations fit or confirm the theory
If we are certain there are enough observations that fit or confirm the theory
Under no circumstances, because we can never be certain that enough observations have been made that fit or confirm the theory
In some cases, but often there are not enough observations that fit or confirm the theory

15

What is the best way to use observation to test a theory?

Try and find observations that confirm the theory
Search for instances that do not fit with or disprove the theory
Try to find instances that both confirm and disprove the theory and work out which outweighs the other
Make as many observations as possible

16

Which of the following statements is true in relation to research?

Often, searching or investigating a topic more than once, may detract from our understanding of the issue
By searching over and over again, each study should contribute to our understanding of the issue
Some research studies will not provide definitive answers to the problem, in which case further investigation should be postponed
Most research studies will provide definitive answers to the problem examined

17

The relationship between theory and research can best be described as:

Research can be associated with both positive and normative theories and can come before or after a theory is formed
Research must come after a theory is formed and is only associated with positive theories
Research must come before a theory is formed and is associated with both positive and normative theories
Research is only associated with normative theories and can come before or after a theory is formed

18

Research is conducted in the form of an experiment where the relative usefulness of historical cost and fair value measures are considered, and it is found that better decisions are made using fair values. This may suggest:

A normative theory that fair value should be used to measure the items in the financial statements
A positive theory that historical cost is not useful and should not be used at all to measure items in the financial statements
A positive theory that fair value should be used to measure the items in the financial statements
A normative theory that historical cost should be used to measure the items in the financial statements

19

Research can be categorized as:

'Research of accounting' or 'research about accounting'
'Research of or about accounting' or 'research in accounting'
Positive or normative
Positive or critical

20

Research of or about accounting would not consider the following question:

What impact do changes in specific accounting policies have on share prices
What impact does culture have on accounting
What role has accounting played in environmental degradation
Should accountability or decision usefulness be the key goal of accounting

21

Which of the following statements is incorrect in relation to critical accounting?

It aims to develop a critical understanding of the role of the accounting profession in the functioning of society and organizations
A critical understanding of the role that accounting plays can be used to engage in change
It aims to critically analyze inefficient accounting practices
It aims to develop a critical understanding of the role of accounting processes and practices in the functioning of society and organizations

22

Research in accounting focuses on:

The bigger picture
Questions such as, what role has accounting played in the rise of capitalism
Issues related to accounting at a macro level
Issues within accounting at the more micro level

23

Research in accounting would not consider the following question:

What measurements are being used
What measures should be used
Should accountability or decision usefulness be the key goal of accounting
What impact do changes in specific accounting policies have on share prices

24

Which of the following statements are incorrect in relation to capital market research?

It is a stream of normative accounting research
It investigated the use of accounting information by capital markets
It was founded by Ball & Brown, and Beaver
It is a stream of positive accounting research

25

Research that attempts to explain the motivations behind the accounting choices made by managers is:

Accounting policy choice research
Capital market research
International accounting research
Critical accounting research

26

Which of the following statements is correct in relation to International accounting research?

Agency or contracting theory underlies much of this research
This research area declined in the second half of the twentieth century due to harmonization
It often adopts a social welfare perspective
It includes research into differences in accounting practices and also considers contextual and cultural influences on financial accounting