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[Harry Veeder <eo200@xxxxxxxxxxxxxxxxxxx>]

Full paper may be downloaded from here:

http://www.cbs.dk/staff/hkacc/BOOK-ART.doc

Harry


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The Logic of Double-Entry Bookkeeping

by Henning Kirkegaard

Department of Financial & Management Accounting
Copenhagen Business School


Perspective and Problem

It goes without saying that double-entry bookkeeping is the accounting
specialists's most important tool, and this has been the case for more than
five centuries. It also goes without saying that any practical manager who
requires knowledge of his firm's financial position must read the balance
sheet, the related accounts of which have been kept according to the simple
but brilliant rules of double-entry bookkeeping. The strength lies in the
rules governing double-entry bookkeeping which allows balancing and thereby
a control of its formal reliabitity. This balancing may be done at any time,
anywhere, by anybody. Double-entry bookkeeping permits the necessary formal
control and audit of all accounts from the single entry to corporate
accounts, or for that matter, the accounts of our entire society, the
national accounts.
    But although this set of rules is the world's most well-known and most
widely-used tool, it also holds so far unsolved epistemological riddles. It
is difficult to explain the system to the student saying, "I have now learnt
the rules and know how to use them in a formally correct way. But what is it
that I am doing? Why must it be done in this way?
    In "The Foundations of Accounting Measurement" (1967) Yuji Ijiri
discus-ses both the brilliant and the puzzling nature of this system:

"Since Pacioli's famous work, Summa de Arithmetica, Geometria, Proportioni
et Proportionalita (1494), there have been so many studies of the
double-entry bookkeeping system that there seems to be no need for further
discussion. The nine-teenth-century mathematician Arthur Cayley called it
"in fact like Euclid's theory of ratios an absolutely perfect one" ... If
the double-entry bookkeeping system is in fact absolutely per-fect, it is
understandable why there has been no change in the basic scheme of
double-entry since Pacioli's work. The duality involved in double-entry
seems to be unique and absolute. Nevertheless it is not possible to say that
we have exploited the mathematical, philosophical, and behavioral
foundations of the double-entry bookkeeping system completely."

Both Richard Mattessich (1970) and Robert N. Anthony (1987) mention and
discuss the problem of recognition in double-entry bookkeeping. They both
emphasize the importance of finding a solution. George C. Staubus (1984)
points to a wide gap in accounting literature: the absence of a general
descriptive theory of accounting measurement. I have therefore chosen to use
Ijiri's most recent book, "Momentum Accounting and Triple-entry Bookkeeping"
(1989) as my point of departure in this article, and I shall propose a new
understanding of the double-entry bookeeping system.
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