Reviewed by Yoshio Fujita Wakayama University, Japan
Why has Japan become the second most important economic power in the free world? The author of this book points out that one of the keys to answer this question lies in the establishment of a modern banking system in Japan.
Only a few years after the 1868 Revolution in Japan, she estab-lished a modern banking system and adopted double-entry book-keeping for this system, both of which had previously been com-pletely unknown to her. This was done by the pioneer bank under the leadership of a young and able organization of bureaucrats and the guidance of Alexander Allen Shad, a staff member of the Yokohama branch of the Chartered Mercantile Bank of London, India, and China.
Acknowledging the contributions of his predecessors, and using original historical documents and data, the author describes and analyzes the process through which this change was accomplished so efficiently and rapidly. He also describes the process in which Japanese bank accounting developed towards the cash slip system integrated with the summarized posting journal and accompanied by a well-structured system of internal checks (Chs, 1, 2).
Since World War II Japan has instituted a series of major im-provements in corporate accounting. The author himself has made several important proposals for these improvements. In order to establish a firm basis for his proposals, he undertook comprehensive historical research of all accounting methods and rules practiced in Japan over the past one hundred years.
He traces the contradiction between the periodic income state-ment and the earned surplus statement for disposal income to the initial Japanese bank accounting rule of 1873 (Chs. 1, 2, and pp. 129,139). Since then, every major legislation and revision of ac-counting rules including the latest revision of bank accounting rules
However, the reason why the accountability function has not been fully accomplished in Japan is not explained. At least in regard to bank accounts this reviewer wants to point out that the examination of bank accounts conducted by the bureaucrat organization within the Ministry of Finance had played a far more important role in developing bank accounting rules than that conducted by any other agents. In this important respect the author’s analysis is insufficient (pp. 34, 59, 120-126, 175, 176). More research is needed in the future to clarify the historical characteristics of social demands imposed on accounting in Japan.
Katano’s present book together with an earlier work entitled, Development of Corporate Financial Statements in Japan, (Tokyo: Dobunkan, 1968, written in Japanese), nevertheless represent pio-neering works on the history of modern accounting in Japan. Both books are of particular value not only for accountants, but also for economic historians, business historians, and sociologists, because they present an in-depth analysis of accounting history in Japan from 1872 to the present.
