Question 1

Which of the following statements aligns with the view of Falsificationists,such as Popper and others?
A) Hypotheses are proposed by guessing, without guidance from existing theories
B) It is possible to state that a theory is true
C) Hypotheses must be stated in a form that assumes they are true, until evidence that is not supportive rejects them
D) All theories are false until they are proved to be true

Accepted Answer

C

Question 2

A theory that predicts that,if certain conditions are met then particular accounting practices will be observed,is an example of .
A) Positive accounting theory
B) Negative accounting theory
C) Normative accounting theory
D) Descriptive accounting theory

Accepted Answer

A theory that predicts certain behavior based on certain conditions is a positive theory. Positive accounting theory focuses on explaining and predicting accounting practices as they exist in reality. It seeks to explain why and how companies use accounting methods, rather than prescribing which methods they should use (normative theory) or criticizing existing methods (negative theory).

Question 3

The sequential stages of inductive reasoning are:
A) Principles, objectives, assumptions and practice
B) Practice, principles, assumptions and objectives
C) Objectives, assumptions, principles and definitions
D) Assumptions, objectives, principles and definitions

Accepted Answer

B

Question 4

Which of the following terms describes a relationship that is argued from the specific (or particular)to the general?
A) Scientific reasoning
B) Inductive reasoning
C) Deductive reasoning
D) Logical reasoning

Accepted Answer

Inductive reasoning involves drawing a general conclusion based on specific observations or evidence. It moves from the specific to the general, whereas deductive reasoning moves from the general to the specific. Therefore, option B is the correct answer for this question.

Question 5

In evaluating theories of accounting,which of the following is not true?
A) Different theories are often the result of working in different paradigms, which provide greatly different perspectives
B) Positive accounting theory is an example of a theory that is value free
C) Selecting a theory, topic, design or method for research, is based on value judgements
D) All theories of accounting, and assumptions on which they are based, are abstractions of reality, and so choice is based on how closely the theory fits our own perceptions

Accepted Answer

Positive accounting theory is not value free as it is based on empirical observations of how individuals behave in the accounting setting. It does not prescribe what individuals should do, but it is not value free.

Question 6

Which of the following statements is true about proving a theory?
A) An accepted positive accounting theory purports to provide sound predictions the majority of the time
B) An accepted positive accounting theory that purports to explain and predict, must hold true in all cases
C) Positive accounting theories do not need to be tested or proven
D) Accepted positive accounting theories have no 'exceptions to the rule'

Accepted Answer

An accepted positive accounting theory is expected to provide sound predictions the majority of the time, but it is not necessary for it to hold true in all cases. Positive accounting theories are based on empirical observations and are subject to testing and revision. Therefore, it is not possible for a theory to have no "exceptions to the rule."

Question 7

Which of the following is true about theories in general?
A) Theories can include any coherent set of ideas or statements to explain, or provide guidance in respect of, certain phenomena
B) Theories must be empirically based to describe what is, rather than what should be
C) Theories must be based on inductive reasoning to provide a generalisation or prediction
D) All of the given options are correct

Accepted Answer

Theories can include any coherent set of ideas or statements to explain, or provide guidance in respect of, certain phenomena. This means that theories can be based on a combination of deductive and inductive reasoning, and don't necessarily have to be empirically based.

Question 8

Which of the following statements are correct about generalising the findings of a study to the general population,based on particular samples?
A) It is not possible to make generalisations unless you study the entire population
B) It is possible to make generalisations as long as the sample is representative of the population
C) It is possible to make generalisations as long as the sample includes at least 50% of the population
D) It is possible to make generalisations if the sample is representative, and its size allows statistical inferences to be made

Accepted Answer

Generalising findings to the general population based on particular samples is possible if the sample is representative of the population and its size is enough to allow for statistical inferences to be made. It is not necessary to study the entire population or have a particular percentage of the population in the sample to make valid generalisations.

Question 9

Theories and models in the social sciences differ from theories in the pure sciences because:
A) Theories about human behaviour cannot be expected to apply all the time, like some natural science theories
B) A number of theories may be available to describe, or provide a different perspective on, a particular phenomenon
C) Not all theories in social science have predictions that can be tested
D) All of the given options are correct

Accepted Answer

Theories and models in the social sciences differ from theories in the pure sciences because they cannot be expected to apply all the time, like some natural science theories; a number of theories may be available to describe, or provide a different perspective on, a particular phenomenon; and not all theories in social science have predictions that can be tested. Therefore, all of the given options are correct.

Question 10

A theory (or model)that states that the most useful information for economic decision making is the current cash equivalents,as measured by the current net market values,is:
A) Current Price Accounting
B) Continuously Contemporary Accounting theory
C) Current Cost Accounting theory
D) Replacement Value Accounting theory

Accepted Answer

Continuously Contemporary Accounting theory focuses on using current cash equivalents and net market values for economic decision-making, emphasizing the relevance of up-to-date financial information.

Question 11

Which of the following statements best explains the role of logic in a theoretical argument?
A) As long as the premises of an argument follow logically from one to the other, the conclusion will be correct
B) A conclusion can only be true to the extent that we accept that the premises on which it is based are true
C) Arguments cannot be rejected on the basis of observation; only on whether they are logical or not
D) All theories and their arguments must correspond with actual observation of current practices, or real-world phenomena, to be logical

Accepted Answer

Logic is important in constructing a theoretical argument, but it is not sufficient on its own. The premises on which the argument is based must also be considered. If the premises are not accepted as true, then the conclusion cannot be considered true either. Therefore, logic alone is not enough for a theoretical argument to be valid.

Question 12

According to Thouless (1974),the 'tricks' some writers often use to distract readers from limitations in the logic of an argument or theory are:
A) Using emotionally-toned words
B) Evasion of a sound refutation of an argument by use of a sophisticated formula
C) Changing the meaning of a term during the course of an argument
D) All of the given options are correct

Accepted Answer

All of the given options are correct according to Thouless (1974). Writers may use emotionally-toned words to sway the reader's opinion without providing sound evidence. They may also use a sophisticated formula to evade a sound refutation of an argument. Additionally, changing the meaning of a term during an argument can confuse the reader and distract them from limitations in the logic of the argument or theory.

Question 13

In evaluating various research studies,it is important to first consider:
A) The logic of the argument and how it is tested
B) The logic of the argument and the assumptions on which it is based
C) The purpose of the study, and the type of theory on which it is based
D) Whether the data collected represents a valid measure of the theoretical variables in question

Accepted Answer

The answer of In evaluating various research studies,it is important...

Question 14

A criticism of Positive Accounting Theory is that it tells us nothing about:
A) Whether the practice or method being used is the most efficient
B) Whether the practice or method being used is the most equitable
C) Which method a firm should use
D) All of the given options are correct

Accepted Answer

Positive Accounting Theory is descriptive and focuses on explaining and predicting accounting practices, rather than prescribing which methods should be used or evaluating their efficiency or equity.

Question 15

Which of the following is not assumed in Positive Accounting Theory?
A) Individuals (including managers) are economically rational in their behaviour
B) Individuals (including managers) are primarily motivated by self-interest
C) The natural objective of managers is to maximise the wealth of the firm
D) Managers are not indifferent in selecting accounting methods to use

Accepted Answer

Positive Accounting Theory does not assume the natural objective of managers is to maximize the wealth of the firm. Instead, it assumes that managers are primarily motivated by self-interest and will make decisions that maximize their own utility within the constraints they face.

Question 16

Which of the following is an example of a dominant paradigm in accounting prior to 1960?
A) Current cost accounting
B) Conceptual framework of accounting
C) Historical cost accounting
D) Continuously contemporary accounting

Accepted Answer

Historical cost accounting was the dominant paradigm in accounting prior to 1960. This approach valued assets and liabilities at their original purchase price, rather than their current market value. It was widely accepted because it provided a clear and objective way to measure financial transactions and results.

Question 17

The failure of a particular study to support a theory:
A) Provides the basis for rejecting the theory as useless or insignificant
B) Means that the particular study must have flaws in its design or execution in specifying and collecting the data
C) Threatens the theory, if repeated or more refined studies fail to support it with empirical evidence
D) Means that the hypothesis was too broad, and did not specify the particular circumstances and conditions in enough detail

Accepted Answer

The failure of a particular study to support a theory does not necessarily mean that the theory is useless or insignificant (option A) or that the hypothesis was too broad (option D). It is more likely that there were flaws in the design or execution of the study, but even this does not necessarily mean that the theory is wrong. However, if repeated or more refined studies continue to fail to support the theory with empirical evidence, then it is natural to feel that the theory is threatened (option C).

Question 18

Which of the following is not an example of a normative accounting theory or research?
A) Conceptual frameworks of accounting
B) Critical perspectives of accounting practice
C) Capital markets based (security price) research
D) True income theories

Accepted Answer

Capital markets based (security price) research is a positive accounting theory or research, which seeks to explain and predict accounting practices based on economic incentives and market conditions rather than normative judgments or values. A, B, and D are examples of normative accounting theories or research, which focus on developing and evaluating accounting principles, standards, and policies based on ethical, social, and political considerations.

Question 19

What is a deductive theory or argument judged by?
A) Logic and assumptions
B) Observable real-world phenomena
C) Empirical evidence of relevant data to test the theory
D) All of the given options are correct

Accepted Answer

Deductive theories or arguments are judged by their logic and the validity of their assumptions, rather than empirical evidence or observable phenomena.

Question 20

Normative accounting theories and research seek to:
A) Explain and predict particular phenomena based on observation
B) Prescribe particular approaches not driven by existing practices
C) Describe what is normal, or generally accepted, practice
D) All of the given options are correct

Accepted Answer

Normative accounting theories and research aim to prescribe particular approaches to accounting that are not necessarily driven by existing practices. They focus on identifying what should be done, rather than what is currently being done or why.

Quiz 1: Introduction to Financial Accounting Theory

Which of the following statements aligns with the view of Falsificationists,such as Popper and others?

A theory that predicts that,if certain conditions are met then particular accounting practices will be observed,is an example of .

The sequential stages of inductive reasoning are:

Which of the following terms describes a relationship that is argued from the specific (or particular) to the general?

In evaluating theories of accounting,which of the following is not true?

Which of the following statements is true about proving a theory?

Which of the following is true about theories in general?

Which of the following statements are correct about generalising the findings of a study to the general population,based on particular samples?

Theories and models in the social sciences differ from theories in the pure sciences because:

A theory (or model) that states that the most useful information for economic decision making is the current cash equivalents,as measured by the current net market values,is:

Which of the following statements best explains the role of logic in a theoretical argument?

According to Thouless (1974) ,the 'tricks' some writers often use to distract readers from limitations in the logic of an argument or theory are:

In evaluating various research studies,it is important to first consider:

A criticism of Positive Accounting Theory is that it tells us nothing about:

Which of the following is not assumed in Positive Accounting Theory?

Which of the following is an example of a dominant paradigm in accounting prior to 1960?

The failure of a particular study to support a theory:

Which of the following is not an example of a normative accounting theory or research?

What is a deductive theory or argument judged by?

Normative accounting theories and research seek to: