Reviewed by Robert M. Kozub The University of Wisconsin-Milwaukee
A Critical Evaluation of Comparative Financial Accounting Thought In America, 1900 To 1920 was written by Gary John Previts as the dissertation requirement for the degree of Doctor of Philos ophy at the University of Florida in 1972. The title suggests his in tention to discuss early twentieth-century accounting theory. Previts begins the discussion by establishing the existence of a Preclassi-cal School of Thought, and doing so, presents an excellent history of early twentieth-century accounting. Included in this analysis are the theories of Cole, Dickinson, Esquerré, Hatfield, Kester, Mont gomery, Sprague, and Wildman.
This book, which consists of eight chapters, discusses four major topics:
1. The environmental elements of the Preclassical era,
2. The contributions of the Preclassicists to asset valuation the ory,
3. The contribution of Preclassicists to income determination theory, and
4. The legitimacy of labeling the Preclassicists as a distinct School of Thought.
Previts devotes two chapters to the environmental factors which in-fluenced the Preclassicists. The first deals with the economic and social events of the early twentieth century which shaped the insti tutions of our age. The second relates how social and economic events affected the financial accounting duties of accountants dur ing the era.
Previts warns against overgeneralization of the contributions of the Preclassicists to accounting theory, emphasizing that their era was one of initial inquiry. Nonetheless, preclassical valuation the ory was, according to him, surprisingly complex. Among the con-tributions of Preclassicists were both a theory of depreciation and appreciation. In Chapter Four, Previts discusses several other the-oretical concepts suggested by the Preclassicists, which were suf-ficiently valid to modify the pure historical cost valuation model. Previts states that “[P]reclassical cost modification theories also supplied the precedent from which the subsequent inquiry of Classi cal accountants would be patterned—as in the search for a specific price-level theory” (p. 148).
In discussing Preclassical accounting income theory, Previts ac-knowledges its strong dependence upon economic concepts. Dur ing the Preclassical period the income statement acquired nearly the same importance as the balance sheet. Because of this, Previts argues that it is incorrect to consider the Preclassicists merely balance sheet accountants. By establishing a modified cost valuation theory, the Preclassicists identified with and modified the indirect approach to income determination. Their modification of the in direct approach created a basis for the emphasis on income theory among Classical accountants.
Previts presents a convincing argument for classifying account ing theorists of this era as a distinct school of thought. For its en lightening perspective, his book is highly recommended to anyone with an interest in the development of accounting theory.
