Positive research seeks to predict and explain phenomena through logical deduction, while normative research makes judgments about what should be. Positive accounting theory, developed by Watts and Zimmerman, uses assumptions from economics to predict which accounting methods managers will select based on self-interest. Specifically, the theory predicts managers will choose methods linked to higher bonuses or avoiding debt covenant violations. However, positive accounting theory does not make judgments about which practices are most efficient or equitable.
Positive research seeks to predict and explain phenomena through logical deduction, while normative research makes judgments about what should be. Positive accounting theory, developed by Watts and Zimmerman, uses assumptions from economics to predict which accounting methods managers will select based on self-interest. Specifically, the theory predicts managers will choose methods linked to higher bonuses or avoiding debt covenant violations. However, positive accounting theory does not make judgments about which practices are most efficient or equitable.
Positive research seeks to predict and explain phenomena through logical deduction, while normative research makes judgments about what should be. Positive accounting theory, developed by Watts and Zimmerman, uses assumptions from economics to predict which accounting methods managers will select based on self-interest. Specifically, the theory predicts managers will choose methods linked to higher bonuses or avoiding debt covenant violations. However, positive accounting theory does not make judgments about which practices are most efficient or equitable.
Research that seeks to predict and explain particular phenomena is classified as positive research and the associated theories are referred to as positive theory. A positive theory begins with some assumption(s) and, through logical deduction, enables some prediction(s) to be made about the way things will be. If the prediction is sufficiently accurate when tested against observations of reality, then the story is regarded as having provided an explanation of why things are as they are. E.g. A positive theory of accounting may yield a prediction that, if certain conditions are met, then particular accounting practice will be observed. Positive theories can initially be developed through some form of deductive (logical) reasoning. Their success in explaining or predicting particular phenomena will then typically be assessed based on observation that is, observing how the theorys predictions corresponded with the observed facts. Positive Accounting Theory is developed by Watts and Zimmerman, which seeks to predict and explain why managers elect to adopt particular accounting methods in preference to others. The theory relied in great part of work undertaken in the fields of economics, and central to the development of Positive Accounting Theory was the acceptance of economics based rational economic person assumption. That is the assumption that an accountant are primarily motivated by selfinterest, and that the particular accounting method selected will be dependent on certain conditions. Factors - FAT 1. Assumption : self-interest 2. Premises : a. The accountant is rewarded in terms of accounting-based bonus; b. The organization they work for is close to breaching negotiated accounting based debt covenants. However, PAT does not seek to tell us that what is being done in practice is the most efficient or equitable process.