profitability of the business

cost of assets in the business

financial capability of the business

operating capability of the business

Positive accounting theory explains what should occur.

Normative accounting theory specifies the prediction rules for items.

Normative accounting theory explains what should occur instead of predicting what is expected to occur.

Normative accounting theory predicts what is expected to occur rather than explaining what should occur.

being able to take more risks without shareholders' consent.

having their shareholders invest more money into expanding the company's operations.

being able to decide what information needs to be made available to shareholders.

having their shareholders be tolerant of low profits if higher profits are expected in the future.

information overload.

the cost of compliance.

the agency costs of monitoring.

the costs of social responsibility reporting.

public information.

public and inside information.

information about future expansion plans.

information about past changes in share prices.

solvency.

economic value.

compliance with the conceptual framework.

the true and fair view of the financial report.

I and III only

I and IV only

II and III only

III and IV only

analyse historical data on takeover targets.

maximise the net present value of the firm's investments.

develop strategies to disclose the company's profit or loss.

employ analysts to determine the best time to issue shares.

goods are produced.

customers order goods.

cash is received for the goods.

goods are dispatched to the customer.

Accountants should not be allowed to use their own judgement.

A true and fair view cannot be assured if individual judgement is allowed.

Judgement can be allowed in the statement of comprehensive income but not in the statement of financial position.

Use of individual judgement is required to choose between alternative methods available within accounting standards.