A Partitioned Events View Of Financial Reporting

The inductive method, as applied to accounting theory development, attempts to find general relationships from the observation of many specific instances. Using the inductive method, it can be shown that current accounting practice as a whole is systematic and rational. All original entries of values in the double-entry system have 2 common properties: 1. They record the exchange events to which a particular entity is a party. 2. They record those exchanges in money numbers. Partitioning includes all of the specific procedures used by accountants to separate the financial accounting database into a series of income statements and balance sheets. This inductive approach produces the following generalizations: 1. Accounting measures historical exchange events. 2. The measures of historical events comprise the whole database of which the balance sheet and income statements are subsets. 3. The concepts of the critical event and matching guide the partitioning of historical measures.