The Role of Deductive and Inductive Reasoning in Accounting Research and Standard Setting

Accounting has been offered as an academic discipline in universities and higher education institutions for more than a century. For the first time in history, the American Institute of Accountants (AIA) puts forth efforts to compile the generally accepted accounting principles back in 1939. Since then, we have witnessed more efforts in setting accounting standards along with an expansion of the accounting theory and academic research studies. All of the mentioned efforts are signs of the fact that accounting is going through a change, from a profession into a field of science. However, one cannot claim accounting as a scientific field without justification, reasoning, and argumentation. Thereby, in this article while studying the deductive and inductive reasoning, we will elaborate their role in developing the accounting theory, setting the accounting standards, and accounting research. What has been expected from the accounting theory is to enable the standard setting authorities to deduce standards. Considering the impact of accounting theory on standard setting, the main aim of this study is to explore the role of deductive and inductive reasoning in the development of accounting theory and setting accounting standards. Furthermore, regarding the fact that accounting research is the joint connection between accounting theory and standards, the role of these reasoning approaches on the integrity of this connection is studied. This non-empirical research is based on reviewing of the existing literature.