Goldberg has thought of accounting theory in two ways. In the first sense, accounting theory is defined as a statement or a set of statements about the activity that is known as accounting, or in other words, propositions about the accounting that is carried out by people who are called accountants. In this sense, accounting theories have tried to rationalize the accounting process comprising recording and/or the reporting of accounting events.

Here the objective- is to rationalise the double-entry procedure and the attempt is at a theory of the recording aspect of the account. The proprietary notion of accounting theory is based on this view which emphasises the fact that recording is carried out from the point of view of the proprietor of an enterprise. This seems to suggest a proprietorship approach to accounting.

In the second sense, the accounting has been used to mean an area of study and consequently accounting theory purports to provide a basis for all functions and areas of study of accounting and is not directed towards meeting a particular problem. Accounting theory is here conceived to be a coherent, coordinated, consistent body of doctrine which may be compactly expressed in the form of standards if desired.

Role of Accounting Theory

2. Accounting theory provides standards to evaluate the acceptability of past, current and proposed accounting methods, procedures and practices.
3. It provides a rational basis for the study of accounting.
4. Accounting theory gives explanations of current accounting practices and is useful to make a prediction of future events or conditions.
5. It enables to give meaningful interpretations to various concepts, such as cost, value, intangibles, The role of accounting theory is to find ways to improve the interpretation of accounting information by various interested parties.
6. Accounting theories enable to measure and evaluate economic, psychological and sociological effects of alternative accounting procedures.
7. Accounting theories help to avoid the diversity of accounting practices being followed by accountants to deal with an event giving different results.

The Emphasis of Accounting Theory

• Decision Theory – Traditionally the focus of accounting was on the measurement of income. But gradually, due to changing social attitudes, developments in the information system, quantitative techniques and behavioural, sciences, the emphasis of accounting shifted from income measurement to decision-making and problem-solving. The quality of decision-making and problem-solving can be improved by improving the quality of the information supplied and by improving the use of the information. Decisions are helpful in making predictions. At this stage it is essentially indispensable to make a distinction between decision-making and problem-solving, though, both are related. Problem- solving is the questioning process seeking to ascertain the causal factors of the problem. Decision-making is the termination of the questioning process with the aim of taking action to remove the problem.

• Measurement Theory – Measurement theory deals with the problem of assessing or evaluating the data needed for decision making. The nature of a particular decision will determine the objects of events to be measured. Objects or events to be measured may be related to past, current or future. Measurements are needed not only to express the objective clearly but also to assess the results of activities involved in accomplishing those objectives
• Information Theory – Information is a resource, Information theory considers the problem of using this resource efficiently. Costs associated with information should be matched with the value of that information. The marginal value of information should exceed the marginal cost.