Time and space in income accounting
Sadao Takatera
a
, Norio Sawabe
b,
*
a
Osaka University of Economics, Osaka, 533-8533 Japan
b
Kyusyu University, Fukuoka, 812-8581 Japan
Abstract
Inspired by the work of DR Scott, we explore the formation of an internal logic of income accounting that bestows
upon the income accounting system an institutional status. As large scale modern corporations emerged in the market,
imaginative ways of doing income accounting were developed and exercised in the 19th century. Creative accounting
practices of the time were eventually evolved into what is now known to be the accrual process. A distinctive feature of
the accrual accounting system, that has the accrual process as its essential part, is that it creates internal space demar-
cated (de-marketed) from the external world. In the demarcated space of the accrual accounting system, ``the Empty-
ing-out of Internal Transaction Time'' takes place. Internal transactions enable the accrual accounting system to
generate smoothed income series out of cash¯ow chaos, which function as an ``attractor'' in the complex relationships
between managers and stakeholders. Creative accounting practices induced phase transition so as to establish the
accrual accounting system as a legitimate social institution. # 2000 Elsevier Science Ltd. All rights reserved.
``Imaginary time is indistinguishable from
directions in space. If one can go north, one
can turn around and head south; equally, if
one can go forward in imaginary time, one
ought to be able to turn around and go
backward. This means that there can be no
important dierence between the forward and
backward directions of imaginary time.
(Hawking, 1988, p. 143).''
Income has always been situated in the core of
accounting discourse. The primary output of
accounting is income ®gures which have been
extensively utilized in everyday economic activ-
ities, not to mention as the basis of income dis-
tribution, for investment decisions, for tax
purposes and so on. Accounting research oriented
towards discovering a theoretically justi®able and
unambiguous ways to measure income seems a
never-ending endeavor, indeed. It might be that
eorts to re¯ect ``economic reality'' in the measure-
ment of income are ever lasting just because it is an
impossible task to accomplish (Boulding, 1962).
Our concern in this paper is institutional: we
explore the aspect of income accounting that con-
structs reality. We investigate the role of income
accounting in constructing an intersubjective cog-
nitive ground for communicative activities within
and without (outside of) organizations. Inspired
by the work of DR Scott, especially by The Cul-
tural Signi®cance of Accounts (1931) which in turn
is in¯uenced by the (old) institutional economics
of Thorstein Veblen, we explore the internal logic
of income accounting that bestows upon itself an
institutional status.
The internal logic of institutions, as long as it is
socially legitimized by its internal de®nitions,
enables institutions to deploy resources for their
0361-3682/00/$ - see front matter # 2000 Elsevier Science Ltd. All rights reserved.
PII: S0361-3682(99)00029-X
Accounting, Organizations and Society 25 (2000) 787±798
www.elsevier.com/locate/aos
* Corresponding author.