The conventions and rules of accounting are commonly termed as the conceptual framework of accounting. Along with any discipline or body of knowledge, several underlying theoretical structure is needed if a logical and helpful set of practices and processes are to be developed for reaching the objectives of the profession, and for expanding facts in that field. The body of principles is needed to assist answer new questions that happen. No profession can thrive in the absence of a notional framework. According to Hendriksen in the year 1977, accounting theory may be explained as logical reasoning in the form of a set of broad principles that are:
(i) give a general frame of reference by that accounting practice can be evaluated, and
(ii) Guide the development of modern procedures and practices. Accounting theory may also be used to describe existing practices to acquire a better understanding of them. But the most significant goal of accounting theory must be to give a coherent set of logical principles that form the common frame of reference for the development and evaluation of sound accounting practices.
AICPA that is the American Institute of Certified Public Accountants discusses financial accounting theory and generally accepted accounting principles as given:
Financial statements are the product of process wherein a large volume of data regarding the aspects of the economic activities of an enterprise are accumulated, analyzed, and reported. Such process must be carried out in accordance along with generally accepted accounting principles. GAAP incorporate the consensus at an exacting time as to that economic resources and obligations must be recorded as assets and responsible through financial accounting, that changes in assets and responsibilities must be recorded, while these changes must be recorded, how the assets and responsibilities and changes in them must be measured, what information must be disclosed and how it must be disclosed, and that financial statements must be prepared.