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Accounting Approaches: Deductive Vs. Inductive Approaches Two Essay

Accounting Approaches: Deductive vs. Inductive Approaches Two major divisions exist regarding the classification of accounting approaches: the inductive and deductive method. "In the deductive or judgmental approach, relevant environmental factors are identified, and, by linking these to national accounting practices, international groupings or development patterns are proposed. In the inductive or empirical approach, individual accounting practices are analyzed, development patterns or groupings are then identified, and finally explanations keyed to a variety of economic, social, political, and cultural factors are proposed" (International accounting patterns, culture, and development, 2012, Wiley: 35-36). In other words, much as in philosophy, in the deductive approach, the analysis proceeds from the general to the specific, while in the inductive approach, the classification system proceeds from the specific to the general.

The first and still one of the most popular deductive methodologies was first developed in 1967 by Gerhard Mueller. Mueller identified four classifications of accounting approaches. In the first, "business accounting correlates closely with national economic policies" (International accounting patterns, culture, and development, 2012, Wiley: 36). This means that business accounting practices are used to support the government's overall national agenda, such as "to stimulate growth, special reserves created to promote investment, and social responsibility" (International accounting patterns, culture, and development, 2012, Wiley: 36)....

Examples include France, Germany, and Sweden. In the second approach, "accounting is viewed as a branch of business economics," and the aim is to maintain the real value of the capital invested in the enterprise (International accounting patterns, culture, and development, 2012, Wiley: 36). As an example, Mueller cited the replacement-value approach popular in the Netherlands.
A third approach is the "independent discipline pattern" which is cemented in pragmatism and designed to advance the interests of the enterprise, as practiced in the United States and United Kingdom (International accounting patterns, culture, and development, 2012, Wiley: 36). Accounting is independent and viewed as its own discipline, with its own concepts and sets of ethics. This can be seen in the generation of what is called GAAP, or generally-accepted accounting principles in the United States, which are not aligned to specific business or government policies, ethics, and practices but which are generated by the accounting profession itself. The fourth approach is a more scientific approach, and used by command economies such as the communist block nations and some government entities. In this "uniform accounting pattern, accounting is viewed as an efficient means of administration and control" (International accounting patterns, culture, and development, 2012, Wiley: 36).

Implicit within Mueller's groupings is the sense that different accounting needs, business, and regulatory environments will produce different types of accounting. However, one of the earliest…

Sources used in this document:
References

International accounting patterns, culture, and development. (2012). Wiley. Retrieved:

http://media.wiley.com/product_data/excerpt/95/04716526/0471652695-2.pdf

Johnson, Sarah & Marie Leone. (2008). The end of GAAP could begin next year.

CFO Magazine. Retrieved:
http://www.cfo.com/article.cfm/12001891
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