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Economic Interests Accounting: A new research of  the essence of accounting¡¡and a construction of the multidimensional accounting system

Preface

There are three following outstanding issues in the current accounting theory: accounting object, the meaning of debit and credit and the essence of accounting. The current accounting theory, apparently, is already very clear, but actually some questions that reflect it has still the basic flaws exist.

1¡¢the essence of accounting

What is accounting? A common explanation to accounting is the following: Accounting is an information system that reflects and supervises the economic activities in the certain entity completely and continuously and systematically through using the special ways and viewing currency as the measuring unit and provides the parties concerned with accounting information. The viewpoint of theory of information system is agreed. What kind of information system is accounting? Undoubtedly, the current accounting is an information system that measures the business activities using currency. The business activities and the currency measurement, however, are only the features of the current accounting system rather than the essential features of it. The essential feature of it is the double-entry bookkeeping system. For understanding the essence of the double-entry bookkeeping system, two following issues must be find out: 1¡¢What does it keep accounts? 2¡¢How to keep accounts using it? The understanding to them depends on the understanding to accounting object and the implications of debit and credit.

2¡¢accounting object

What is accounting object? It isn¡¯t involved in the western accounting. And in our country, it is also discussed for several ten years and many articles and works put forward a lot of opinions, such as theory of reproduction process, theory of property, theory of wealth, theory of labor amount, theory of economic activities, theory of property right, theory of fund movement, theory of value movement and so on. As they vary, no unanimous conclusion can be drawn. The book thinks apparently they have some reasons, while actually they aren¡¯t correct because they don¡¯t reflect the central points of accounting object. Since 1980¡¯s, it has seldom discussed in accounting in our country. It ends up with nothing definite. Has it already been settled? Whether isn¡¯t it worthwhile studying or can¡¯t it study?

The scholars get lost in accounting object. They realize their errors and mend their ways to study the elements of accounting. The phenomenon that the forest (i.e., accounting object) isn¡¯t seen while the trees (i.e., accounting equation) is only seen appears in the accounting study. The forest equals the sum of trees from the amounts. As we know, the element is the basic factor forming the things and the elements of accounting are the basic content forming accounting object. So there has an equation that accounting object equals the sum of the elements of accounting, that is, the former equals the sum of assets, liabilities and owner¡¯s equity. The correct expression of accounting equation is that the sum of assets, liabilities and owner¡¯s equity is equal to zero. Then, the equation that assets equal the sum of liabilities and owner¡¯s equity is tenable only under the circumstance that the positive and negative sign of each element of accounting is not considered.

3¡¢the meaning of debit and credit

All kinds of accounting textbooks think debit and credit have lost their implications and they are only the simple entry signs. How regrettable it is! It is the destiny of the current accounting theory. In fact, their implications are doom to inexplicable under the equation that assets equal equity. Because under it, various changes in the elements of accounting can only have increase and decrease or have both increase and decrease. This is the entry rule in increase-decrease bookkeeping system. It deeply tell us from the reverse side accounting world of debit-credit bookkeeping system based on the equation can¡¯t be deduced. But under the condition that the sum of assets and equity equals zero, any change in the elements of accounting has only one result¡ªhaving increase must have decrease and increase must equal decrease. Therefore, the conclusion in the book is that the implication of debit is increase and that of credit is decrease.

The above flaws not only seriously affect the scientificalness and the depth and the rigorousness of accounting theory system, but also seriously hinder the strong functions of it into full play in the accounting practice. This leads to the seriously insufficient information that is provided by it. Its concrete expressions are as follows.

     1¡¢The information system based on the equation that assets equal the sum of liabilities and owner's equity strictly limits the information that it can provide.

The accounting information system is a system of most rich contents and the demand for accounting information is varied. The current accounting system, however, can only provide three data about assets, liabilities and owner's equity. Accounting information could have been most rich, while the information system based on the equation that assets equal the sum of liabilities and owner's equity has forced people to act in a Procrustean manner and massively useful information has been forced to exclude from it. Such accounting information system is really far from complete.

2¡¢The current accounting system only establishes a set of accounts which reflect the objects (i.e., things) instead of the entities (i.e., persons) and the projects (i.e., works) in economic activities.

Any economic activity is a behavior which is that the certain entity act on the certain object through the certain way. The accounting should calculate not only the objects (i.e., assets, liabilities and owner's equity) but also the entities (i.e., each responsibility center) and the activities (i.e., all types of business activities). A variety of material accounts and personal accounts were once established in the history. But in the current accounting system, there only has the material accounts instead of the personal accounts, not to mention the activities accounts. So the book considers the current accounting system is actually the one-dimensional information system rather than the plane system, not to mention the multidimensional system.

3¡¢The current accounting system only provides the financial information and it is very difficult to provide the management information and responsibility assessment information.

The accounting information that one-dimensional accounting information system can provide is too little. The business management includes the financial management, the business activities management and the management to each internal responsibility unit and so on. Accordingly, accounting needs provide the management with the financial information, the business information and the responsibility assessment information. But the current accounting system can only provide the financial information which regards assets, liabilities and owner's equity (i.e., objects) as the main contents.

The acquisition of the responsibility assessment information depends on the entity (e.g., some department, some workshop or some branch, etc.) accounts system and that of the business information depends on the activity (e.g., purchasing activity, production activity, sales activity, financial activity, management activity, rear service activity, etc.) accounts system. These accounts systems aren¡¯t completely neglected in the current accounting system (for example, there is the calculation on the responsibility center in the responsibility accounting), but they are far from perfect. When the statement of cash flows is prepared, the information of cash flows on business activities, investment activities and financing activities is not easily obtained according to the relevant accounts, which relates to it.

To counter the above problems, the book preliminarily discusses some basic issues in the basic accounting theory and puts forward the idea that accounting object is the economic interests and designs a set of the multidimensional accounting system. The book applies to accounting researchers and teachers in the scientific research institutions and universities and colleges, and practitioners as well. It can also be used as a textbook for graduate students and undergraduate students. At the same time, it can be used as a reference for economics and management studies. The author sincerely hopes that readers can put forward their valuable advices. If the book can offer a few commonplace remarks by way of introduction so that others may come up with the valuable opinions, the author feels satisfied. For inadequacies in this book is inevitable, please readers give criticism and correction.

                                   QiuShan Tao

Business School Of Xiangtan University

¡¡                       E£­mail:taoqiushan@163.com