Case Scenarios: 2

Two accounting theories that help create the system investors and managers use today : Positive and Normative Accounting Theories.

Text 1

Text 2

if an organisation has had a highly successful financial year, the next year they will have the financial stability to boost investor dividend payments. This theory would deduce that corporate growth causes an increase in shareholder remittance.

if a corporation has previously boosted investor dividend payments, and is now looking to reinvest funds into the firm to ensure its future viability through corporate sustainability measures, then theory would point to issuing new shares as a source of funding

Task 2: Identify a positive theory and a normative theory from the list above and justify your answer by referring to the differences between two theories.