Accounting theory

Accounting theory consists of the principles and concepts that underpin how financial information is recorded, reported, and interpreted. It provides a framework for accountants to ensure consistency, transparency, and comparability in financial statements. Essentially, it guides the development of accounting standards and practices, helping users like investors and managers make informed decisions. Accounting theory addresses questions about which information should be reported, how it should be measured, and the underlying assumptions that support these processes. It serves as a foundation for maintaining integrity and credibility in financial reporting.