Which of the following statements is not true about Positive Accounting Theory?
A) It is used to distinguish research aimed at explanation and prediction.
B) It is designed to explain and predict which firms will, and which firms will not, use a particular method, and also prescribes which method a firm should use.
C) It focuses on the relationships between the various individuals involved in providing resources to an organisation, and how accounting is used to assist in the functioning of these relationships.
D) One of the key theories that underpins Positive Accounting Theory is Agency theory.

Question

Quizplus · Accepted Answer

Positive Accounting Theory does not prescribe which method a firm should use, rather it explains and predicts which firms will or will not use a particular method. The theory is primarily concerned with explaining accounting practices and their relationship with decision-making within an organization, rather than the relationships between individuals providing resources to an organization. Positive Accounting Theory is based on Agency Theory, which suggests that conflicts of interest between different stakeholders can lead to agency costs.

Which of the Following Statements Is Not True About Positive