Accounting theory may be defined as logical reasoning in the form of a sef of broad principles that provide a general frame of reference by which accounting practice can be evaluated, and guide the development of new practices and procedures. Accounting theory may ako be used fo expiain existing practices fo obfain a better understanding of them. But the most important goal of accounting theory should be fo provide a coherent set of logical principles that form the general frame of reference for the evaluation and development of sound accounting practices (Hendrikson, 1992).

Required: Accounting theories always seem fo be fied fo policies. To what extent does the quallty of accounting policy and accounting practice depend on accounting theory? Describe the relationship between accounting theory. accounting policy, and accounting practice.