DEDUCTIVE ACCOUNTING THEORY Definition

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DEDUCTIVE ACCOUNTING THEORY (mathematical method) assumes that optimal accounting standards and reporting rules can be derived by deduction much in the way that Pythagoras derived the rule for measuring the hypotenuse of a triangle based upon square root of the summed squares of the other two sides (assuming one angle is a perfect 90-degree angle).

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DISCRETIONARY FIXED COST normally has a budgetary life of under one year, i.e. the cost arises from annual budgetary decisions by management in specific fixed cost areas, e.g. R&D or Marketing.

 

CONTROL ENVIRONMENT is the attitude, awareness, and actions of the board, management, owners, and others about the importance of control. This includes integrity and ethical rules, commitment to competence, board or audit committee participation, organizational structure, assignment of authority and responsibility, and human resource policies and practices.

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