Positive Accounting Essay

electro confident(p) frugal scheme and vexation relationship practices are objective and tack on fact. Positive invoice foc utilizations on analyzing the sparing statistics and data at hand, and derivation conclusions based on those figures. For example, if corporate branch allows a follow to increase shareowner dividends over previous dividend payments, official bill theory would conclude that corporate maturement causes a rise in stockholder dividends. Most bookkeeping and data army involved with accounting relates to positive economic theory.Normative AccountingNormative economic theory is subjective and aims to describe what the economic prospective should be for a accomp each or investor. As a result, prescriptive accounting practice is a plaster cast of value judgment that can sneak in subjective morality into accounting. For example, if a companion that increased dividend payments could use some of those cash to improve corporate get downability measu res, a normative accounting statement would present how oft money should be invested in those measures to sustain corporate growth. Normative accounting withal deals with future events rather than past data, which is the scope of positive accounting practices.When to UsePositive accounting practices are crush apply to explain past financial events, as well as the causes of a lineages or individuals current financial standing. Determining wherefore a company is operating at a net loss requires the positive accounting practices of comparing actual tax revenue to actual expenses over the course of a year. These accounting practices are typically apply to construct financial documents, such as balance sheets or cash come down statements. Normative accounting practices are best used when trying to set future economic policy based on theory. A companys missionary work statement or the market strategies include in business plans can be viewed as normative statements they refle ct the business ideals that a company wants to accomplish.Working unneuroticProper 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 through 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 nucleotide for companies to engage in normative accounting, and a more idealistic view of how the company can operate while still earning a profit. See more athttp//wiki.fool.com/Differences_Between_Positive_%26_Normative_Accountingsthash.1hNg6Mt3.dpuf