Kenneth O. Elvik, Editor
IOWA STATE UNlVERSlTY
Reviewed by Joseph R. Oliver The University of Texas at San Antonio
Theory of Accounts is a reprint of DR Scott’s introductory accounting text copyrighted in 1925 by Henry Holt and Company. Despite the fact that the book was initially intended for use in university ac counting courses, it provides an interesting view into past interrelationships of accounting and business. While more than forty years have passed since its first publication, the work continues to in still in the reader an appreciation for Scott’s foresight and his grasp of the role of accounting in its environment.
Scott emphasizes in his preface the importance of a broad education in giving an accounting student an appreciation for the “pert played by accountants in the economic organization of society.” The book was written in that vein, and the option of supplementing it with selected problems (but not mere bookkeeping practice) was suggested. The author’s purpose for the book, then, was “to give students an oriented knowledge of accounts.” Since the book is divided into four parts, each part will be discussed separately.
References to the historical evolution of accounting and its inter-relationships with business and political development occur with surprising frequency throughout the text. Nowhere is this more evident than in Part l which begins with a chapter entitled “Development and Functions of Modern Accounting.” Part I subsequently affords the reader an overview of the accounting function, devoting five more chapters to examinations of the balance sheet, income statement, ledger and trial balance. Scott pointedly conveys his opinion that accounting is “best studied from a functional rather than a static viewpoint” since he believes it to be “a vital part of an ever changing system of economic machinery.”
Part II is more mechanically oriented than Part I, exploring the processes through which accounting gathers and processes in-formation. The author presents the elements of bookkeeping, making particular reference to their interrelationships with contemporary and prior business enterprises. He expects the instructor to supplement what he terms a “highly condensed” explanation of bookkeeping with further discussions and considers such additional comments to be most appropriate in a university course.
An examination of capital accounts of partnerships and corporations is the thrust of Part Ill. One chapter is devoted to partnerships with an overview of business form and specific discussion of trans actions affecting capital accounts. Three chapters survey the corporate organization and its capital accounts. Considerable space is given to transactions affecting “reverses”.
Scott sees the open market as adjusting most conflicting economic interests, the process of adjustment being that of “valuation” in which accounting plays an integral part. Part IV, about one-third of the text, is concerned with valuation. Within this section are three chapters on depreciation, but more than half of Part IV discusses means with which values could be placed on assets. In one particularly forward-looking section, cost and current market value are contrasted as bases for valuing assets. Scott is cognizant of the fact that some government regulation of business is necessary to resolve conflicting interests. He sees government as being an occasional substitute for the open market in setting values, but in no way a replacement for management of enterprises under regulatory authority.
In addition to stressing the increasing importance of accounting in developing economic institutions, Scott’s summary notes that one who has studied the text should have more of an understanding of the “larger aspects” of accounting than the mechanics of book keeping. He wants the student to appreciate the historical development of accounting, the likely influences upon its future evolution and its increasing role in the world around it.
Theory of Accounts is certainly a productive addition to any library. Used initially in mimeograph form at the University of Missouri where Scott spent all of his working years, the text was polish ed in the classroom and embellished with the thoughts of a man who could be regarded as an early visionary in the discipline of accounting.
James C. Stewart, Pioneers of a Profession (Edinburgh, Scotland: Scottish Committee on Accounting History, The Institute of Charter ed Accountants in Scotland, 1977, pp. xii, 181, t6.50)
