Tips: Answer the question by explain 2 elements that available for PAT to make prediction.

Answer should NOT be usefulness, relevance, reliability, comparability, and consistency

Watts and Zimmerman (1986, p.7) state, Positive Accounting Theory (hereafter referred to as PAT): is concerned with explaining accounting practice. It is designed to explain and predict which firms will and which firms will not use a particular method ... but it says nothing as to which method a firm should use. Refer to the statement above, identify TWO (2) main elements employed by the Positive Accounting Theory and explain how these elements are used to explain and predict which firms will and which firms will not use a particular accounting method. |