Entrepreneurial strategy v. accounting accuracy in ‘calculating’ capital and income

Entrepreneurial strategy v. accounting accuracy in ‘calculating’ capital and income Both entrepreneurs and accountants ‘calculate’ capital and income but their procedures diverge. The paper examines this divergence and the respective calculational objectives of entrepreneurs and accountants in the business enterprise. For the entrepreneur, capital and income are ex ante calculational judgments of prospective income gain from strategic use of the enterprise’s capital goods. But the accountant must shun entrepreneurial judgments to ‘calculate’ the contemporary net market value of enterprise’s capital goods at a specified date. Hence, the accountant’s calculation of income is the net contemporary increase in the market value of the enterprise’s capital goods. These accounting calculations facilitate assessment of the success of an enterprise strategy. But critics assert that accounting practice ignores the need of external investor’s for accurate information on enterprise prospects. The paper concludes with a critique of accounting regulation and explores the feasibility and means of privatizing the entrepreneurial choice of accounting techniques. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Review of Austrian Economics Springer Journals

Entrepreneurial strategy v. accounting accuracy in ‘calculating’ capital and income

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Publisher
Springer US
Copyright
Copyright © 2011 by Springer Science+Business Media, LLC
Subject
Economics; Public Finance; Political Science; History of Economic Thought/Methodology
ISSN
0889-3047
eISSN
1573-7128
D.O.I.
10.1007/s11138-011-0157-1
Publisher site
See Article on Publisher Site

Abstract

Both entrepreneurs and accountants ‘calculate’ capital and income but their procedures diverge. The paper examines this divergence and the respective calculational objectives of entrepreneurs and accountants in the business enterprise. For the entrepreneur, capital and income are ex ante calculational judgments of prospective income gain from strategic use of the enterprise’s capital goods. But the accountant must shun entrepreneurial judgments to ‘calculate’ the contemporary net market value of enterprise’s capital goods at a specified date. Hence, the accountant’s calculation of income is the net contemporary increase in the market value of the enterprise’s capital goods. These accounting calculations facilitate assessment of the success of an enterprise strategy. But critics assert that accounting practice ignores the need of external investor’s for accurate information on enterprise prospects. The paper concludes with a critique of accounting regulation and explores the feasibility and means of privatizing the entrepreneurial choice of accounting techniques.

Journal

The Review of Austrian EconomicsSpringer Journals

Published: Jun 10, 2011

References

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