Abstract

This paper audits and evaluates the positive accounting writing following the distribution of Watts and Zimmerman (1978, 1979). The 1978 paper created the positive accounting writing which offers a clarification of accounting practice, recommends the significance of contracting costs, and has prompted the disclosure of some beforehand obscure empirical normalities. The 1979 paper delivered a methodological discussion that has not been exceptionally profitable. This paper endeavors to eliminate some normal misguided judgments about techniques that surfaced in the discussion. It likewise proposes approaches to improve positive examination in accounting decisions. The most significant of these enhancements are more tight connections between the hypothesis and the empirical tests. A second proposed improvement is the advancement of models that perceive the endogeneity among the factors in the relapses. A third improvement is a decrease in estimation blunders in both the reliant and autonomous factors in the relapses.