Accounting Theory

AAA

DEFINITION of 'Accounting Theory'

Assumptions, methodologies and frameworks used in the study and application of financial principles. The study of accounting theory involves a review of both the historical foundations of accounting practices, as well as the way in which accounting practices are verified and added to the regulatory framework that governs financial statements and financial reporting.

INVESTOPEDIA EXPLAINS 'Accounting Theory'

Accounting as a discipline has existed since the 15th Century. Since then both businesses and economies have greatly evolved. Accounting theory is a continuously-evolving subject, as it must adapt to new ways of doing business, new technological standards and gaps that are discovered in reporting mechanisms. Organizations such as the International Accounting Standards Board help create practical applications of accounting theory, and professionals such as CPAs help companies navigate accounting standards.

RELATED TERMS
  1. Financial Statements

    Records that outline the financial activities of a business, ...
  2. Accounting

    The systematic and comprehensive recording of financial transactions ...
  3. Certified Public Accountant - CPA

    A designation given by the American Institute of Certified Public ...
  4. Generally Accepted Accounting Principles ...

    The common set of accounting principles, standards and procedures ...
  5. International Accounting Standards ...

    An older set of standards stating how particular types of transactions ...
  6. Expanded Accounting Equation

    The expanded accounting equation is derived from the accounting ...
Related Articles
  1. A Clear Look At EBITDA
    Markets

    A Clear Look At EBITDA

  2. The Flow Of Company Information
    Investing Basics

    The Flow Of Company Information

  3. Understanding The Income Statement
    Forex Education

    Understanding The Income Statement

  4. International Reporting Standards Gain ...
    Insurance

    International Reporting Standards Gain ...

comments powered by Disqus
Hot Definitions
  1. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  2. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  3. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  4. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  5. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  6. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
Trading Center