Definition of Accounting theory:
A discipline of study which examines the methodologies, assumptions and frameworks of financial accounting principles.
Accounting theory is a set of assumptions, frameworks, and methodologies used in the study and application of financial reporting principles. The study of accounting theory involves a review of both the historical foundations of accounting practices, as well as the way in which accounting practices are changed and added to the regulatory framework that governs financial statements and financial reporting.
All theories of accounting are bound by the conceptual framework of accounting. This framework is provided by the Financial Accounting Standards Board (FASB), an independent entity that works to outline and establish the key objectives of financial reporting by businesses, both public and private. Further, accounting theory can be thought of as the logical reasoning that helps evaluate and guide accounting practices. Accounting theory, as regulatory standards evolve, also helps develop new accounting practices and procedures.
How to use Accounting theory in a sentence?
- The Financial Accounting Standards Board (FASB) issues generally accepted accounting principles (GAAP) which aim to improve comparability and consistency in accounting information.
- Accounting theory is a continuously evolving subject, and it must adapt to new ways of doing business, new technological standards, and gaps that are discovered in reporting mechanisms.
- Accounting theory provides a guide for effective accounting and financial reporting.
- Accounting theory involves the assumptions and methodologies used in financial reporting, requiring a review of accounting practices and the regulatory framework. .
Meaning of Accounting theory & Accounting theory Definition