INDUCTIVE ACCOUNTING THEORY Definition

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INDUCTIVE ACCOUNTING THEORY (scientific method) assumes accounting standards are somewhat like evolution of a species in nature --- survival of the fittest. It relies heavily upon controlled experimentation (e.g., behavioral accounting research) and statistical testing (e.g., capital markets "events" studies of the impact of accounting information on market prices and volume of transactions).

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OVER-BILLING is invoicing in excess of agreed upon pricing or exaggerating the amount of services or goods provided (sometimes illegally).

LCM RULE is an abbreviation for lower-of-cost-or-market rule. LCM requires that an asset be reported on the financial statements at the lower of purchase cost or market value.

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