Concept of ‘Theory’ and ‘Accounting Theory’

Accounting is usually viewed as a subject that engages in a discussion of techniques and tools that accounting professionals employ in the practice. However, what is not really appreciated is that these techniques and tools employed in the practice have been devised in a systematic and orderly manner to ensure that the practice results in an output, which is useful to those who require the services of accounting professionals. A famous Classical Greek scholar, Aristotle, claimed that practice emerges from theory. Thus, generally speaking, theories provide the reasoned basis for practice. The process of theorizing is designed to obtain an understanding and then provide an explanation of phenomena to serve as the basis for practice. In this context, this chapter explains the need for theory and some of the essential considerations involved in the process of developing theories.

There is no precise definition for theory. The word theory is derived from the classical Greek word meaning ‘viewing, speculation and contemplation.’ A theory is usually defined as a logical combination of interrelated concepts, definitions and propositions that describe a systematic view of phenomena by establishing relations among variables, with the purpose of explaining and predicting the phenomena. However, there are various perspectives as to what is meant by a theory. Hendriksen (1970) defines a theory as “a coherent set of hypothetical, conceptual and pragmatic principles forming the general framework of reference for a field of inquiry.” According to Most (1982) “a theory is a systematic statement of the rules or principles of which underlie or govern a set of phenomena. A theory may be viewed as a framework permitting the organization of ideas, the explanation of phenomena and the prediction of future behaviour.” On the other hand, Choir and Mueller (1984) assert that a theory is

(a) an integrated group of fundamental principles underlying a science or its practical applications;

(b) abstract knowledge of any art as opposed to the practice of it;

(c) a closely reasoned set of propositions derived from and supported by established evidence and intended to serve as an explanation for a group of phenomena; and

(d) an arrangement of results or a body of theorems presenting a systematic view of some subject.

Personal Character is,

One of most important lecture among guest lecture series was the lecture on Personal Character. The benefit of this lecture cannot be explained by words. I experienced the facts discussed under this guest lecture by applying those in my day to day activities.

Personal character categorize as below. That can be described as collection of many behavioral attributes which exists in human beings and can be different from one person to another.

• Engagement of Right behaviors and use of Right Words
•   Personal
• Aggregate of Special Qualities 
•  Morality
•  Set of persistent qualities
• Real nature
• Inward desire to do right at any cost

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By attending to the gust lectures I improvised important needed good quality characteristics to my life. And also I learned how to manage my morality and civility without doing any harmful things to another personal character. I learned an important concept on which the success of our lives is always based and I can explain that in my views as the existence of human’s character can be led by the non-violence among the people. The ability not being against the people who are around us can be achieved by improving our tolerance and the ability of analyzing of all the aspects in anything and by improving the level of respect aimed at the feelings of others. That is one thing that I have learned in this lecture.

The nature of the person as good or bad depends on the morality and the civility of that person. Everyday People are learning. Virtues are the collection of good things, good thoughts and good experiences that people have learned in the movement of their lives. I learned what are the virtues, Different natures that virtues can be existed; they are mostly discussed under following important aspects of Human beings.

·         Benevolence

·         Tolerance

·         Self-Discipline

·         Caring

·         Loyalty

The extent of various virtues which are inherent and possessed by us can be evaluated by using indexes. The Lecture of Personal Character trained us to evaluate us ourselves.

Suggestions for improvements

• Coordination through budgets - adapt the coordination of traditional budgeting for increasing complexity and dynamics

MMM can obtain a competitive advantage through dynamic changes in its operations rather than remaining stable. Therefore the company can experience modern budgeting system adapting the environmental changes successfully. Not only that the company may be able to be in a position that the competitors cannot reach without a huge effort to beat the company.

• Decentralization - increase flexibility of budgetary process by decentralized authority

Centralization of authority may have negative impact on budgeting process and it may restrict the communication of effective ideas and suggestions from the lower level regarding the budgeting system. If the company attempts to decentralize its authority, work load of top management can be reduced to a greater extent and it will be an administrative ease in making only critical decisions.

• Focus and criticality reduce the level of detailed budgets and therewith increase speed of forecasting

More focus on detailed budgets may lead to a time wasting and inefficiency in operation. The company must reduce the level of detailed budgets considering the essence, importance & relevance of information. And also it is recommended to MMM to increase the speed of forecasting through skilled & experienced personnel 

• Analytical planning from baseline - no longer based on previous year's effective figures

Past cannot be treated as the scene of future. But we can only get mere  idea about what will be happened in future. Therefore dependence on past does not always generate favorable consequences for the organization and it may take the management into totally error forecasting.