Jensen, Watts and Zimmerman (referred to hereafter, following Jensen [1976], as "the Rochester School of Accounting") have charged that most accounting theories are "unscientific" because they are "normative." They advocate the development of "positive" theories to explain actual accounting practice. The program of the Rochester School raises a number of methodological issues that are addressed in this article. First, it is argued that the Rochester School's criticism of traditional accounting theory is off the mark because of a failure to distinguish between two different levels of phenomena. Second, it is argued that the concept of "positive" theory is based on the misconception (derived from nineteenth-century positivism) that empirical science is concerned solely with the actual, with "what is." Empirical theories, it is shown, are negative in their import; they state what is to be taken as empirically impossible. Third, it is shown that "negative" theories of the sort described in this article are exactly what is needed in predictive, explanatory, and normative reasoning. Finally, it is argued that the standards advocated by the Rochester School for the appraisal of their own theories are so weak that those theories fail to satisfy Popper's [1959] proposal for demarking science from metaphysics.

The past several years have seen a substantial increase in the application of the concept of present value in making capital investment decisions. The concept itself is by no means new. Its use in the financial field dates back several centuries, and it is the basis for such common financial techniques as the determination of bond yields, mortgage amortization schedules, and so forth. Moreover, applications to capital replacement situations have been discussed in engineering literature. The past reluctance of businessmen to use the present value concept in allocating capital resources may have had a variety of causes. Many may have been discouraged by the apparent complexity of the mathematics involved. Others no doubt felt that the added refinement of technique was not justified in view of the rough estimates to which the techniques are applied. While it is true that the present value concept involves mathematics above the level of simple arithmetic and hence more involved than that used by the traditional techniques, it is not necessary to deal with these complexities.