Which research methodologies are used in formulating an accounting
theory?
“ The divergence of opinions,
approaches and values between accounting practice and accounting research have
led to the use of two methodologies, one descriptive and the other
normative”-Belkauli, “Accounting Theory”.
The research sequence follows the cyclical
patterns in the following manner:
In this sequence, the mode is
sometimes deductive, while at other times inductive.
Like in the other discipline, a
methodology is required for the formulation of an accounting theory. Two
primary methods of reasoning are applied in research:
(i)
Inductive approach and
(ii)
Deductive approach.
(i) Inductive Method:
The inductive method involves
reasoning from the particular to the general. It is the process of drawing
generalized conclusion from detailed observation and measurements. If recurring
relationship can be found, the generalization can be formulated.
For example, if every cow which
we have observed eats grass, by induction, we may induct that all cows eat
grass.
Figure:
Example of an inductive approach
The advantage of inductive
approach is that it is not necessarily considered by a preconceived model or
structure. The researchers are free to make any observation they may deem
relevant.
(ii)
Deductive Method: The deductive method involves
reasoning from the general to the particular. According to Hendrick, “The
deductive method of reasoning in accounting is the process of starting with
objectives and postulates and from these deriving logical principles that
provide the basis of practical application.
For example, from the general
proposition that all cows eat grass, we may deduction that some cows eat grass.
Figure:
Example of a deductive approach
The structure of deductive
process should include the following:
(i)
The formulation of general or specific objectives of
financial report;
(ii)
A statement of the postulates of accounting concerning
the economic, political and sociological environment.
(iii)
A set of constraints to guide the reasoning process.
(iv)
A framework in which ideas can be expressed and
summarized.
(v)
The development of a set of definition.
(vi)
The formulation of a generalizes statement and
(vii)
Finally the application of the principle to specific
situation and establishment of the procedures.
A= L + P
One of the main advantages of the deductive method is that if any of the
postulates and premises are false, the conclusion may also be false.
