1. The following statement relates to an approach in the formulation of accounting theory:

A discussion of assets, liabilities, revenue and costs is premature and meaningless until the basic principles that will result in a fair presentation of the facts in the form of financial accounting and financial reporting are determined. This fairness of accounting and reporting must be for and to people and those represent the various segments of our society.

Source: R.T Sprouse and Maurice Moonitz, (1982). A Tentative Set of Broad Basic Accounting Principles for Business Enterprise, Accounting Research Study No 3, New York, AICPA

REQUIRED:

1. The truth in recording and delineating fair information is essential in the accounting theory. Explain the rationale of the following theories related to the truth in relation to the excerpt above.

• pragmatic theory

2. Explain on the other related accounting theory that may influence the development of accounting theory as a whole.

• normative theory; and

• positive accounting theory

3. Which approach is suitable to explain the above statement in relation to the development of accounting theory? Explain the related approach.