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WHAT IS A THEORY?

Accounting Theory Lecture 1a


December 17, 2016
What is a THEORY?
It is something that we use to explain and
predict something.
For example, we use accounting theory to
explain and predict accounting.
In making the explanation and prediction, we use
a set of concepts and propositions.
What comes to
your mind when
I say the word
tree?

Now, that is the


concept of
tree,
according to
Each Box is a CONCEPT, each
A CONCEPT MAP ABOUT arrow is a PROPOSITION.
WHAT CAUSES
SEASONS?
hmm ... say that again?

What is, in Grafields mind, the meaning of each


of these four concepts: Depressed, Staying Up,
Happy, and Energy?
In a theoretical framework, a concept has a unique
DEFINITION.
A Formal DEFINITION
A theory is a set of systematically
interrelated concepts, definitions,
and propositions that are advanced
to explain and predict phenomena
(facts).
Cooper and Schindler. 2013.
Business Research Methods.
Does Garfields opinion constitute a theory?

Staying Being Energy


Up Late Happy Drain

opinion vs. theory,


what is the difference?
Here is another definition of THEORY
... a coherent group of tested
general propositions, commonly
regarded as correct, that can be used
as principles of explanation and
prediction for a class of phenomena.
Example: Einstein's theory of relativity.

http://www.dictionary.com/browse/theory
18 December 2016
Strictly speaking, to be called a theory, it should be
scientifically tested and generally accepted.

Testable
Explanations

Hypotheses

Theories
however ...

As you will see


later on, we are
not going to use
the word theory
in its strictest
sense.
Lets tease your brain ...
Are the following statements constitute a theory (or part
of a theory)?
Managers with bonus plan are more likely to choose
accounting methods that increase current period
reported income.
Managers should choose accounting methods that
resulted in financial statements that best convey the
companys financial position and result of operation.

In fact, both statements are part of accounting theory.


Lets take a break, but keep in mind that

we are going to learn the concepts,


definitions, and propositions that
we use to explain and predict
accounting practices.