Positive Accounting Essay

Positive economical theory and accounting coiffures ar objective and based on fact. Positive accounting focexercisings on analyzing the economic statistics and data at hand, and deriving conclusions based on those figures. For example, if corporate outgrowth allows a company to increase shareholder dividends over previous dividend payments, coercive accounting theory would conclude that corporate growth causes a burn down in stockholder dividends. Most bookkeeping and data collection touch on with accounting relates to controlling economic theory.prescriptive AccountingNormative economic theory is infixed and aims to describe what the economic future should be for a company or investor. As a result, prescriptive accounting practice is a form of value judgment that can introduce subjective morality into accounting. For example, if a company that increased dividend payments could use some of those coin to improve corporate sustainability measures, a normative accounting sta tement would request how much money should be invested in those measures to sustain corporate growth. Normative accounting also deals with future events rather than past data, which is the domain of positive accounting practices.When to UsePositive accounting practices are best utilise to explain past pecuniary events, as well as the causes of a businesss or individuals current financial standing. Determining why a company is operating at a net loss requires the positive accounting practices of comparing actual revenue to actual expenses over the course of a year. These accounting practices are typically utilize to construct financial documents, such as balance sheets or cash flow statements. Normative accounting practices are best used when trying to set future economic policy based on theory. A companys mission statement or the trade strategies included in business plans can be assureed as normative statements they reflect the business ideals that a company wants to accomp lish.Working Together comely financial planning for any business or individual requires the use of both positive and normative accounting practices. On a large scale,economists indicate financial policies by means of normative accounting statements, but these normative statements must be based on the financial realities found through positive accounting practices. The factual-based practices of positive accounting provide a substructure for companies to engage in normative accounting, and a more idealistic view of how the company can operate while still earning a profit. image more athttp//wiki.fool.com/Differences_Between_Positive_%26_Normative_Accountingsthash.1hNg6Mt3.dpuf