What are the relationship between accounting theory and policy making?

Accounting theory provides the conceptual framework and principles that guide the development of accounting policies. Policy making involves the process of creating specific rules and procedures based on accounting theory to address practical issues. The relationship between accounting theory and policy making is crucial as policies should be consistent with the underlying theories to ensure accurate and reliable financial reporting. Effective policy making requires a deep understanding of accounting theory to make informed decisions that align with the objectives of financial reporting.