Evolution of Accounting Methodology within the Balance Model of the Company

Abstract

The correspondence between modern financial statements and society’s informational requirements is the problem discussed in the article. The core of the problem is recognized as an evolution of drawing up a balance process as an accounting model of business entity during the period of existence of double-entry accounting — from L. Pacioli’s work (1494) to the present day. Th e following theories are sequentially considered: formation of modern double-entry postulates; theory of static balance; O. Schmalenbach’s (1873–1955) theory of dynamic balance; I. Sher’s (1846–1924) two-lines theory; Ph. Schmidt’s theory of organic balance; conceptual framework of the balance preparing applied by the modern Anglo-American accounting school. The historic transformation of balance sheet as a method of accounts validation into the model of a company representing relations between assets and sources of capital is shown. It is discussed how balance sheet impacts the subject of accounting and development of its methodology. The balance sheet as a company model is defi ned as a restraint of informational abilities of modern accounting.
Also, we explained the influence of static-dynamic nature of the balance on the possibilities of its content analysis. Refs 34.

Keywords:

balance, model, evolution, theory, accounting, information, fact, assets, liabilities, capital, profit