Accounting
Accounting is the method by which an organization measures the use of assets and liabilities against money. It is an indispensable tool and prerequisite to modern day capitalism.[1] Double book entry accounting is a method by which every economic action must affect two accounts so that they balance in the equation: Assets - Liabilities = Equity.
Recent Developments
Modern day capital accounting in the United States is under the standard Generally Accepted Accounting Principles (GAAP). The Securities and Exchange Commission (SEC) has proposed a movement to international financial reporting standards or IFRS.
Economic calculation directs the actions of individual business persons. "Economic logic prevails over the technological," says Schumpeter.[2] The transition to a world standard of accounting may impart some benefits, for example: "...in more efficient functioning of capital markets and a lower cost of capital for the economy as a whole." [3] In sum, the method of economic calculation has importance in economic analysis.
References
- ↑ Max Weber, General Economic History, trans. Frank H. Knight (New York, NY: Collier Books, 1961) 208-209
- ↑ Joseph Schumpeter, The Theory of Economic Development, trans. Redvers Opie (Cambridge, Massachusetts: Harvard University Press, 1961) 14
- ↑ Statement of Financial Accounting Concepts, No. 8 [1] QC37