The Relevance of Normative and Positive Accounting Theory for Today's Decision Makers
Year: 2026
Type: article
Abstract: This article examines normative and positive accounting theories, as well as their implications for current accounting practice. Normative accounting theory takes a deductive-prescriptive approach, focusing on how accounting should be done based on ideal and logical principles, whereas positive accounting theory takes an empirical-descriptive approach, explaining and predicting accounting practices using empirical evidence and economic motivations. This paper also identifies four major criticisms of positive accounting theory: (a) its overly narrow self-interest assumption, (b) its value-free nature that ignores ethical aspects, (c) its stagnant research focus on three classical hypotheses, and (d) its failure to consider the socio-cultural context. To solve these constraints, it proposes integrating with social theories, including an ethical dimension, expanding to modern topics such as ESG and sustainability reporting, and adapting to variances in institutional and cultural contexts (Wagenhofer, 2023). This research indicates that both theories play significant and complementary roles in the advancement of accounting theory and practice. The creation of a more comprehensive accounting theory necessitates the integration of normative and positive approaches that take into account ethical, social, and cultural factors. Accounting scholars, regulators, standard setters, and practitioners must understand the dynamics of these two theoretical views in order to build and execute accounting rules that are effective and relevant to contemporary trends.
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W7155842007
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