Nama : MUKHSIN ZUHRI NIM : 1401103010045

UNDERSTANDING THEORY

No precise definition exists for theory. The word is derived from the Classial Greek word
meaning viewing, speculation and contemplation. It could be defined as a set of
propositions which provides principles of analysis or explanation of a subject matter
(Mautner 2000, p. 562). There is no one view of a theory that would permit a single
definition acceptable to all. However, from the above it can be seen to involve things such
as reasoning, propositions, concepts, logical analysis, hypotheses, explanations, phenomena,
reality and abstraction.
In developing theory, a theorist will undertake research. The procedure is rather circular as
theoretical assumptions will be made during the research process undertaken to support or
create theory. In fact, research will be undertaken also to improve practice. This is done to
better explain elements of practice or to understand phenomena such that predictions can be
made as to their behaviour. A prerequisite for a full understanding of accounting theory is
an awareness of the processes involved in developing a theory and the implications of these
for practice. If this aim is to be met, it is necessary to determine and understand the elements
of theories and theory construction. The discipline of philosophy is where most of these
elements have arisen and been discussed and debated. Consequently, it is to a brief
introduction to philosophy and philosophical terms that we need to turn our attention.
Philosophical Foundations
Ontology
Ontology is the theory of being, it is designed to determine the natore of the fundamental
kinds of things that exist, Theorists all have an ontological commitment, which is the
assumptions about what there is and what sorts of things are assumed to exist. It is usually
assumed that we all see the world in the same way; that is: we all think of the world as
existing as a solid reality and we regard anyone who does not see it this way as being
somehow not normal. This view is described as a realist ontology. Such an ontology is
based on the belief that objects in the world have an existence independent of us.
But there can be alternative ontological assumptions. We are concerned with how we know
of the existence 0f things, and if there is no one there, we can never know of them so their
existence is irrelevant. This is a non-realist ontology. An extreme example of a non-realist
world is that of the solipsist, the person who claims that only he or she exists and everything
else is a fabrication of his or her mind.

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Nama : MUKHSIN ZUHRI NIM : 1401103010045

Epistemology
The process by which we obtain knowledge is called epistemology. Epistemology is usually
referred to as the theory of knowledge and consists of the rules of how and whether
knowledge is acquired. The word has it its origins in the Classical Greek episteme meaning
knowledge and logos meaning theory. It is also concerned with the relation between the
knower (the humanthat is, the researcher) and the object known (the object of the
inquirythat is, the researched), possible kinds of knowledge and the degree of certainty
for each kind of knowledge, and the nature of truth. Epistemology and ontology are generally
held to be the foundation of all knowledge.
Methodology and Methods
Methodology is a much abused word as it is often confused with methods. It is the
framework of the means for gaining knowledge. Methodology investigates and evaluates
methods of inquiry and thus sets the limits of knowledge. Methodology is about methods
but it is not the same thing.
It is very important to understand the relationship between ontology, epistemology,
methodology and methods, The ontological position adopted by a theorist will determine
what she or he sees as valid claims to knowledge. A realist ontology will lead to a realist
epistemology. Therefore, if a theorist has a realist ontological commitment, as discussed
above, she or he believes that things exist independently of anyone wishing to know of the
thing. Consequently, that person will believe that, if we wish to have knowledge of the thing,
then we can employ a methodology that leads to the methods of physically examining the
thing. This examination of the thing will enable us to understand it and subsequently explain
it. This will lead some to claim that we then know the truth of the thing.
The Development of Western Knowledge
If we are to seek the origins of our Western knowledge then we must first look to the Ancient
Greeks for it is there that we find the basis of our current thinking. At least three of the
Classical Greek scholars .stand out in terms of their contribution to Western thinking
Socrates, Plato and Aristotle. Along with their contemporaries, they questioned our
existence and the basis for knowledge.\
If we adopt a realist ontological commitment to the study of some phenomenon then we
have to accept that it exists separate from usthere is a distinction between the knower (the
researcher or the person interested in the phenomenon) and the known (the object of
knowledge). The basis of deductive logic is the syllogism. A syllogism is a form of argument

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Nama : MUKHSIN ZUHRI NIM : 1401103010045

in which a conclusion follows from several premises. Therefore, a deductive argument is

assessed on its validity rather than its truth value. For the argument to be true the premises
must be true. To be an effective deductive argument, the premises must be framed carefully.
Consequently, a syllogism is a powerful tool of analysis but its use must be carefully
considered if it is to be successfully employed in constructing knowledge or theories.
Modernity
The period in history known as the Renaissance (15th and 16th centuries) is so called
because it acknowledged the rebirth of confidence in the human capacity to learn, understand
and explain the world. The Renaissance ushered in the era of modernity: the replacement of
traditional (non-industrialised) society by modern social forms. The characteristics of
modernity have been and continue to be debated rigorously. Moreover, in modern societies
there was an emphasis on secularisation, capitalism and modern economic individualism.
Positivism also invnlved notions of reduction, causality and simplicity. All three of these
notions are ontologically and epistemologically closely related.
Scientific Revolutions
In 1962 a philosopher of science, Thomas Kuhn, published a book which had a significant
impact on thinking in almost all disciplines, including accounting. His book, The strocture
of scient)fic revolutions, challenged the view that knowledge is cumulative. In an article
published in 1976, Wells argued that similar revolutions had occurred in accounting. One of
the major problems that accounting had not been able to solve had been financial reporting
in times of fluctuatingusually risingprices. As indicated above, in Western thinking,
science was held to be the ultimate in intellectual rigour, and the scientific method was the
basis for establishing true and meaningful knowledge.
The Discipline of Accounting
The need for order in modernity led to the creation of disciplines. There are two meanings
of the word discipline. One is the action necessary to ensure that individuals conform to
accepted social behaviour. Thus, a student at school is disciplined if they break the school
rules. The other general meaning of discipline relates to the setting of the boundaries of a
subjectthe discipline of economics, the discipline of finance, the discipline of accounting.
Given that accounting is usually seen as a service discipline the above is probably obvious.
As business and society have become more complex so too has the task of knowing who is
defining accounting. It is also obvious that it will be those with the greatest political power.