An Inventory of Financially Coherent Accounting Systems

This paper distinguishes certain well-known accounting systems on the basis of five axioms characterizing their concept of capital maintenance. The structure of these ‘financially coherent accounting systems’ is reduced to a description in terms of simple diagrams called ‘double-edged chain graphs’. The resulting classification singles out essential properties of the functions which update the accounting measurements in balance sheets over time, and provides a framework within which to identify the specific mathematical forms such functions must take if they are to accord with the capital-maintenance assumptions found in accounting practice.