Reviewed by Dale Buckmaster University of Delaware

This book represents an ambitious effort by two assistant professors, one at the University of Michigan (Paton) and one at the University of Iowa (Stevenson). I trust that the book made a significant contribution towards their promotion. Paton and Stevenson were writing a textbook, and they make it clear that they feel their objective was to provide the student with the opportunity to understand accounting rather than to demonstrate existing methodologies for the treatment of specialized problems. Illustrative journal entries are sparse, but adequate, and ideas are plentiful. Contemporary textbook writers would do well to emulate their style. The book being reviewed represents the third version of Principles of Accounting. Zeff [1979] has described the development of the three versions with the following evaluative comment:

The 1917 and 1918 versions are not designated as second and third editions, although the titles are identical. Of the three versions, the one published in 1918 is by far the best known—indeed, few citations to its predecessors may be found in the literature. The successive versions grew steadily from 222 pages to 373 and finally 685 pages, re-flecting, among other things, the authors’ expansiveness and increasing conviction of the rightness of their controversial conclusions. (p. 93).

This edition of Principles of Accounting represents an attempt to provide a rather comprehensive coverage of accounting problems of the first quarter of the twentieth century. Paton and Stevenson have divided it into an Introduction and six parts. The Introduction contains a definition of accounting, a description of the economic environment creating the need for accounting, and the function of accounting within that environment. Part One, Elements of Accounting, is a development of the basic ideas of accounting and the data accumulation methods that are equivalent to the material that now normally constitutes the content of a first college course in accounting. However, the great detail that we normally find now is missing. Emphasis is on ideas.
Part Two, The Equity Accounts, consists of a description of equity accounting for proprietorships, partnerships, and corporations plus a chapter on liabilities. We find the equivalent of Part Three, The Interest Problem, in contemporary Intermediate Accounting. There is a discussion of interest and types of debt, an extensive treatment of present value and annuities, and descriptions of accounting for interest on debt and from investments.

Many will find Part Four, The Valuation of Assets, most interesting. For example, Chapter XX, The Basis for Revaluation, contains the following subheadings:

The General Significance of Value Changes
Valuation and Management
The Measurement of Investment or Sacrifice
Special Objections to the Recognition of Appreciation

The title of Part Five, The Construction and Analysis of Financial Statements, is descriptive of this four-chapter section.
The last part of the text of the book is Part Six, Special Fields of Accounting. Each of the four chapters is an overview of a topic not covered in earlier chapters. The topics are Cost Accounting, Municipal Accounting, Railroad Accounting, and Auditing.

I am incapable of determining the role of this book in the develop-ment of accounting thought. If one is to do this, it is crucial that a judgment be made of the degree to which the book is representative of accounting thought of the time and the degree to which unorthodox ideas are advanced. I cannot make this judgment because I lack the requisite breadth of knowledge of early twentieth century accounting thought. Zeff [1979] indicates, however, that:
lt is no surprise that in the first significant period of his writings, 1917-1918, Paton emerged as an idealist. Accounting writers are inclined to cite his 1918 textbook, Principles of Accounting, which he wrote with Russell A. Stevenson, as his most uncompromising challenge to accounting orthodoxy. And it was. (pp. 91-92).

BIBLIOGRAPHY

Zeff, Stephen A., “Paton on the Effects of Changing Prices on Accounting, 1916-55,” in Stephen A. Zeff, Joel Demski, and Nicholas Dopuch, eds. Essays in Honor of William A. Paton: Pioneer Accounting Theorist (Ann Arbor, Mich.: Graduate School of Business Administration, The University of Michigan, 1979), pp. 91-138.