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What is accounting theory?

Accounting theory refers to a set of principles, concepts, and frameworks that guide the practice and understanding of accounting. It provides a systematic approach to analyzing and interpreting financial transactions and information. Accounting theory helps establish the foundation for accounting standards and practices, aiming to enhance the usefulness, reliability, and comparability of financial reporting. It involves studying topics such as measurement, valuation, disclosure, and decision-making in accounting, and evolves over time to adapt to changes in business environments, regulations, and economic conditions.