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Chapter 1. Written for the senior undergraduate accounting and postgraduate student, Financial Accounting Theory retains the same basic strengths that made its predecessor a market leader. It has a writing style that is easy to read and understand, includes critical evaluation and balanced discussion of different theories of accounting that will spark student interest. The book also develops analytical reasoning by challenging students to think about accounting issues at hand, and formulate opinions. The learning objectives of this chapter are to: (1) understand that there are many theories of financial accounting; (2) be aware of the importance that knowledge of different accounting theories has in understanding and evaluating various financial accounting practices; (3) understand that the different theories of financial accounting are often developed to perform different functions, such as to describe accounting practice, or to prescribe particular accounting practices; (4) understand that theories, including theories of accounting, are developed as a result of applying various value judgements and that acceptance of one theory, in preference to others, will in part be tied to one''s own value judgements; and (5) be aware that we should critically evaluate theories (in terms of such things as the underlying logic, assumptions made, and evidence produced, before accepting them.