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Question 1: Theoretical Frameworks in Corporate Accounting

In corporate accounting, various theoretical frameworks guide financial reporting practices. Discuss the key differences between the Positive Accounting Theory (PAT) and the Normative Accounting Theory (NAT).

Solution:

Positive Accounting Theory (PAT) focuses on describing and predicting actual accounting practices within corporations. It emphasizes the role of self-interest and incentives in shaping accounting policies. PAT suggests that managers choose accounting methods that align with their personal objectives, such as maximizing bonuses or share prices.

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Greetings students,

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Solution:
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