Accounting and Capitalism. Are they interrelated?

Overview:
This article provide us with information that whether accounting comes first before Capitalism or vice versa. Economic historian put a general claims that double entry book-keeping has been vital to the development and evolution of capitalism. later than that we'll meet another key person that would argue about this issue. They're: Max Weber, Sombart, Yamey and Winjum

Max Weber argument
He emphasizes that capitalistic enterprise wasn't been possible without 2 other important factor:

• Seperation on entity
• Rational bookkeping

Sombart Thesis
Sombart arguments is tally with Max Weber that both phenomenons are connected as intimately as form and content. it is irrational to say which one is started first. his arguments is further explained about the asset is transformed into statement and numbers made it possible for:
capitalistic entrepreneur to plan, conduct and measure the impact of his/her activities
for a separation of owners and the business itself thus allowing growth of corporation.


4 Role of D/E (Double Entry) in the economic expansion interpreted by Sombart

1. D/E contributed to a new attitude toward economic life. Goal of gaining profit is introduced. Spirit of acquisition was promoted and encouraged. D/E was used for the profit searching purposes and concept of capital was made possible.
2. Spirit of acquisition was aided and propelled by the refinement of economic calculations. Rationalization could be based on a rigorous calculations & present economic status could be readily determined and rational plans for future operations could be developed.
3. New rationalism was further enhanced by systematic organization. D/E very duality provides for a check on accuracy. Its mechanization and objectivity contribute to an orderly and continued recording of business affairs. It also promotes order in the accounts and organization in the firm (a unique system for classification)
4. D/E Bookkeeping permits a separation of ownership and management and thereby promotes the growth of the large joint stock company. By separation of entity's assets, it makes possible the autonomous existence of the enterprise.

Yameys' arguments
He indicate that businessman (1600-1800) didn't use D/E bookkeeping to keep track of profit and capital but simply a record of transactions.

D/E bookkeeping interpretations from Yamey's perspective

• D/E is just providing a framework.  
• D/E bookkeeping is not necessary for determining profits and capital
• D/E bookkeeping is only useful for routine problems
• It is not necessarily useful for the selection from the opportunities available for the businessmen.

Winjum interpretations for D/E Bookkeeping contradicts Yamey's
He provides evidence early in 1600 stating that "profit and loss determination was a foundation in D/E bookkeeping".

Winjum's Conclusion
He agree about Sombart that accounting has a relationship with capitalism, and D/E bookkeeping does have the capability of making a positive contribution towards economic growth. It also could bring order to the affairs and accounts of merchants and stimulated and rationalized the economic activities in the early English merchant.