Metrical and Empirical Laws in Accounting

Neglect of the laws that govern operations on money amounts lies at the center of all the disputed features of traditional accounting and much of the argument about alternative systems of accounting. The simplest form of accounting is cash movement accounting. The prices at which goods and services are exchanged for money, and amounts of money in the possession of any party, are expressed in multiples of the local monetary unit. Persons or firms in any country may come into possession of and spend both domestic and foreign currencies. The rate of exchange is the price at which one currency exchanges for another. The general purchasing power of money units varies inversely with the general level of prices. Any person or firm may become entitled to receive from, or obliged to pay to, others amounts of money for goods or services delivered or loans made. Cash, receivables, and payables exchange for other things (goods, services, freedom from debt) at known face values. Assets such as merchandise, plant, and property do not have face values.