Page 53-74
* Corresponding author: swarsono@ugm.ac.id
The Relationality of Rules of Debit and Credit
SONY WARSONO*
Universitas Gadjah Mada
Abstract : Double-entry bookkeeping (DEB) and the rules of debit and credit (RDC) have been used in practice and taught in academia for at least 500 years. In the journal Issues in Accounting Education, certain scholars have debated whether RDC needs to be eliminated from introductory accounting courses. The proponents argue that teaching RDC bears greater costs than benefits and that the rules are not intuitive for most students. Conversely, the opponents argue that RDC is fundamental knowledge in accounting and has been shown to survive without many changes. The unfinished nature of the debate was partly due to the absence of the objective rationality of RDC. This paper shows that DEB and RDC have a close relation mathematically. Initially, this paper presents speci fic essential facts regarding double-entry bookkeeping as a vast knowledge that should be respected by modern accounting scholars.
Furthermore, this paper presents the rationality of RDC. This rationality is based on a mathematical perspective because RDC was documented in the book of mathematics and written by a professor of mathematics. RDCs are applied to address the writings on the reduction of monetary value.
Keywords : Double-entry bookkeeping, rules of debit and credit (RDC)
Kata Kunci : Pembukuan double-entry (DEB) dan aturan debit dan kredit (RDC) telah digunakan dalam praktek dan diajarkan di dunia akademis setidaknya selama 500 tahun. Dalam jurnal Masalah dalam Pendidikan Akuntansi, sarjana tertentu telah diperdebatkan apakah RDC perlu dihilangkan dari kursus akuntansi pengantar. Para pendukung berpendapat bahwa mengajar RDC menanggung biaya yang lebih besar daripada manfaat dan bahwa aturan tidak intuitif untuk sebagian besar siswa. Sebaliknya, lawan berpendapat bahwa RDC adalah pengetahuan dasar dalam akuntansi dan telah terbukti bertahan tanpa banyak perubahan. Sifat perdebatan yang belum selesai sebagian karena tidak adanya rasionalitas obyektif RDC. Makalah ini menunjukkan bahwa DEB dan RDC memiliki hubungan yang erat secara matematis. Awalnya, makalah ini menyajikan fakta-fakta penting spesifik mengenai pembukuan entri ganda sebagai pengetahuan luas yang harus dihormati oleh sarjana akuntansi modern.
Selanjutnya, makalah ini menyajikan rasionalitas RDC. Rasionalitas ini didasarkan pada perspektif matematika karena RDC didokumentasikan dalam buku matematika
54
dan ditulis oleh seorang profesor matematika. RDC diterapkan untuk mengatasi tulisan-tulisan tentang pengurangan nilai moneter.
1. Introduction
The Accounting Education Change Commission (1990) encouraged the accounting academic community and other stakeholders to make changes to accounting education because accounting programs fail to follow the development of the ever-changing profession consistently, dynamically, and complexly. Furthermore, the Accounting Education Change Commission (1992) asserted that the first course in accounting is essential and potentially provides significant benefits for many individuals who intend to pursue a career in accounting and who intend to enter the business, government, and other organizations that require accounting information for decision making. The first course in accounting is expected to provide fundamental knowledge to accounting students for upper-level course study and to provide an appropriate understanding to non-accounting students regarding accounting functions in business and other organizations. Since then, many initiatives and research studies have been conducted that are directly or indirectly related to efforts to change the learning process in the first course in accounting, including some of the following papers.
The Accounting Education Change Commission offers funding to improve accounting education. The Accounting Education Change Commission provided funding of nearly $ 1 million for five projects in five universities in 1990 (Williams and Sundem, 1990) and a total of $ 1.2 million for five projects in six universities in 1991 (Williams and Sundem, 1991). DeMong, Lindgren, & Perry (1994) propose a matrix for assessing student outcomes. In addition to the use of a variety of pedagogical tools, Rankine & Stice (1994) recommend the use of readings from the popular press accompanied by the appropriate sequence of questions in an introductory accounting course. Saudagaran (1996) redesigns the first course in accounting in the curriculum and changes the course from Introductory Accounting to Introduction to Accounting. Kern (2002) evaluates the use of hands-on conceptual models in an active learning environment in introductory accounting classes. David,
55 Maccracken, & Reckers (2003) integrate the use of technology and business process analysis into the first courses on accounting. Rankin (2003) investigates the effect of diversity on student academic performance of first-year undergraduate students, particularly on accounting students. Springer & Borthick (2004) present the implementation of business simulation in introductory accounting courses. Fowler (2006) empirically tests whether the use of simulation games as part of active learning in the first course in accounting encourages a higher level of skills than the use of a traditional lecture format. Fordham & Hayes (2009) test whether paper color has an effect on quiz scores in accounting principle courses. Laing (2010) examines the use of mnemonic devices to improve learning processes in elementary accounting courses.
Duchac & Amoruso (2012) describe the data on institutional characteristics in the first course in accounting. Warren & Young (2012) propose the design of Integrated Accounting Principles considered as the best practice course. In his dissertation, Fisher (2013) measures the effectiveness of graphical organizers in teaching introductory accounting courses. Recently, Chiang, Nouri, & Samanta (2014) compared the use of the traditional approach to the use of a friendly approach in an introductory accounting course. In conclusion, for approximately 20 years, there has been much research focused on learning in the first course in accounting, including both pedagogic approaches and methods of learning. The research is necessary because a wide variety of students takes the first course in accounting.
The learning model in the first course in accounting that was used until the late 1980s is commonly known as the traditional approach in contrast to the innovative approach (Saudagaran, 1996) or the preparer approach in contrast to the user approach (Diller - Haas, 2004; Williams, 2011). The traditional approach mainly discusses the application of rules of debit and credit (hereafter RDC) in recording transactions (Chiang et al., 2014). This approach has been widely criticized. The perspective of bookkeeping is narrow (Saudagaran, 1996) and it is a poor use of time to merely memorize bookkeeping procedures (Chiang et al., 2014). Warren & Young (2012, p.
248) state that the bookkeeping approach "requires students, predisposed to think accounting is irrelevant to them, to learn the new language of debits and credits and to
56
meet instructors on unfamiliar turf, likely in a 'land' the students hope to visit never again".
Wanda A. Wallace (1997), as the editor of Issues in Accounting Education, raises the issue of the position of debits and credits in accounting education. As a response, Pincus (1997a, p.576) states that the focus on debit-credit as the essence of introductory accounting course has created a significant cost; "...the focus on debits- credits in the introductory accounting course may repel some of our best prospects”,
“...we give non-majors a misimpression about the role of accountants in society”, and
“it also fosters the wrong mindset for our majors to carry forward to other accounting courses and the workplace”. Furthermore, Pincus (1997a, p.579) argues that the focus on debits credits in introductory accounting courses did not achieve the intended benefits: “[s]tudents tend to memorize, rather than understand, debits-credits. They do not retain the knowledge very long or transfer it very well to related topics in later courses”. In this simple statement, Pincus (1997a, p.575) clearly states that “[t]eaching debits and credits in the introductory course is NOT essential.” In the same journal, Vangermeersch (1997a) requires accounting educators to engage in deep thought before intending to eliminate debits and credits in elementary accounting courses.
Vangermeersch (1997a) reminds us that "[a]ccounting taught by "debits and credits"
has survived momentous technological changes like the special journals of the late 1700s, the loose leaf ledgers of the late 1800s, the bookkeeping machines of 1920, and the computers of the 1950s.” (p.582), and “if accounting students—and indeed all business majors—do not have a strongly infused knowledge of the fundamentals of accounting, they have been ill-served by us.” (p.583).
In her reply, Pincus (1997b, p.585) argues that “...the accumulating evidence to date does not support the notion that it is crucial to begin an accounting education by focusing on debits and credits”. However, in his rebuttal, Vangermeersch (1997b, p.587) asserts that “I have never seen anyone hurt by being basically sound in accounting but have seen countless numbers ruined by not being basically sound in accounting.” Extending the academic debate between Pincus and Vangermeersch, Ingram (1998, p. 413) argues that debits and credits are nearly exclusively beneficial
57 in manual systems whose further contributions decreased with the use of information technology because "[t] he computer translates the debits and credits back into pluses and minuses ".
Specific empirical research seeks to compare the traditional (preparer) approach and the innovative (user) approach, certain of these include the following four papers.
Using the survey design for 33 accounting departments, Diller-Haas (2004) finds that 29% of the accounting departments apply a "blended" approach rather than a "user"
approach, and the remainder (71%) continue to apply the traditional approach in the introductory accounting curriculum. Using 101 students in the experimental design, Fowler (2006) compares the use of active learning to the use of the traditional approach using a debit and credit application in introductory financial accounting courses. Fowler (2006) finds that the impact of the use of active learning on the student's critical thinking and evaluation skills is no different from the use of the traditional approach. Using an explanatory study, Palm & Bisman (2010) indicate that the first accounting content, in general, remains traditional, with a focus on credit debit. Using a quasi-experimental design, Chiang et al. (2014) examine the impact of teaching approaches in an introductory financial accounting course on student performance in a subsequent finance course. The results indicate that the impact of the teaching approaches (traditional approach vs. innovative approach) on the performance in the finance course has no significant difference (Chiang et al. 2014).
The academic debate regarding debit and credit thus far is considered incomplete.
Williams as a former Chair and Executive Director of the Accounting Education Change Commission projects that "[n] o doubt there will be continued debate about the role of teaching ''debits and credits'' in the first accounting course." (Williams, 2011, p.775). This polemic has not been completed due to a lack of rationality of RDC. Most modern scholars perceive RDC merely as rules, arbitrary or custom, although RDC has been occurring for more than 500 years without undergoing any significant change.
In the next section, this paper describes double-entry bookkeeping (DEB) as reliably beneficial knowledge. The third section presents the objective rationality of
58
the rules of debit and credit (RDC) that follows the facts that occurred in the period, i.e., the use of money as a medium of exchange in business transactions. The final section contains discussions and conclusions.
2. The great double-entry bookkeeping
Double-entry bookkeeping (DEB) is an example of great knowledge because it has proven reliable for more than three generations (Chambers, 2000). Many scholars over the centuries praised the greatness of DEB. Therefore, it is essential to study the literature on DEB before discussing RDC.
As widely acknowledged, Luca Pacioli delivers DEB in his mathematics book entitled Summa de Arithmetica, Geometria, Proportioni et Proportionalita (hereafter, Summa). Summa’s English title would be Collected Knowledge of Arithmetic, Geometry, Proportions, and Proportionality (Weis & Tinius, 1991). As described by Hernandez-Esteve (1994) and Sangster, Stoner, & McCarthy (2007), Summa consists of two volumes with the following details. The first volume contains nine chapters.
Chapters 1 to 7, inclusive, discuss arithmetic, Chapter 8 discusses algebra, and Chapter 9 discusses a variety of topics regarding the application of mathematics in business. Chapter 9 consists of 12 treatises. DEB is in the eleventh treatise, entitled Particularis De Computis et Scripturis. The second volume consists of one chapter, chapter 10, which addresses geometry. The section of Particularis de Computis et Scripturis appears to be included for the sake of completeness to recognize the importance of arithmetic principles in the application of bookkeeping (Rabinowitz, 2009).
Pacioli was not an accountant or a bookkeeper. Pacioli was a mathematics professor who taught at several universities (Hatfield, 1924), published some books, which were primarily in the pure mathematics field (Sangster et al., 2007) and in various fields of applied mathematics, including the military (Weis & Tinius, 1991).
The first time Summa was published, Luca Pacioli had been teaching mathematics courses at several universities for more than 30 years (Sangster et al., 2007). Pacioli
59 was awarded the title of Father of Accounting by modern accounting scholars for his services.
It is possible that DEB had existed hundreds of years before it was published in Summa (Yamey, 1994; Rabinowitz, 2009). The majority of scholars believe that Pacioli contributes significantly to documenting the state of DEB at that time for the following reasons. First, Pacioli presents practical business rules without discussing the philosophy of DEB (Littleton, 1928). This presentation would indicate that DEB was already an established discipline and that its use did not need to be justified.
Second, the Summa title suggests that the book is a collection of pre-existing knowledge. Third, DEB is thought to have been used by the merchants of Venice several centuries before the publication of Summa (e.g., Kats, 1930; Yamey, 1947, de Roover, 1955; Edwards, 1960; Lee, 1973; Mann, 1994). These suggested reasons may have motivated certain researchers to propose the origin of DEB (e.g., Martinelli, 1977; Mattessich, 1989; Aiken & Lu, 1998; Zaid, 2000), which occasionally led to debates that are not easily resolved. For example, Jacobsen (1964) argues that DEB derived from the accounting practices of the Inca in Peru. In response, Forrester (1968) reports that the Inca had a moneyless economy. Lall Nigam (1986) claims that Bahi-khata was an early forerunner of DEB development and that it was used in India hundreds of years before DEB was used in Italy. In response, Nobes (1987) concludes that Lall Nigams' claims are supported solely by anecdotal evidence.
Since the inception of DEB, many scholars have marveled at its efficacy and efficiency. Among them are the following. Von Goethe (1795 [Ch. X, par. 13]) states that DEB “is among the finest inventions of the human mind; every prudent master of a house should introduce it into his economy.” Cayley (1894, p. 5) holds that DEB “is in fact like Euclid theory of ratios an absolutely perfect one….” Childs (1895, p. 77) states that DEB “is a beautiful system - a science in fact ....” Hatfield (1924) suggests that the excellence of DEB is the main reason for viewing accounting as an academic discipline. Littleton (1928) notes that accounting owes its modern status to the Middle Ages because modern accountants have not been able to improve upon the original formulation of DEB. Weber, Schumpeter, and Sombart (in Carruthers & Espeland,
60
1991) argue that DEB is an important instrument in the service of rationality and has played an important role in the development of capitalism. Chambers states that DEB
“could accommodate anything” (1987, p.99) and is “the source of modern accounting”
(2000, p.328). Yamey (1994, p.380) concludes that the basic framework of double entry is the sole accounting practice to adapt and survive for more than “700 years: a tribute to its adaptability”.
DEB is one of few principles that has remained unchanged for more than 500 years (Littleton, 1928; Rabinowitz, 2009). DEB has been practiced for hundreds of years and forms the foundation of modern accounting (Littleton, 1928; Edwards, 1960). However, despite its success, DEB is considered to be a mystery (Littleton, 1928; Yamey, 1947, 1994). Recently, Gleeson-White (2012, p. 8) stated: “... the double-entry bookkeeping is one of history's best-kept secrets and most important untold tales”. Waymire (2012) and Basu (2012) assert that DEB is a practice, the efficacy of which has not been satisfactorily explained. At the conclusion’s end, Basu (2012, p.865) specifically requests accountants to answer the question “Why is the double-entry bookkeeping beautiful?”
In conclusion, DEB is a legacy for accounting to be admired from generation to generation and continuously applied until now. Unfortunately, thus far, the greatness of academic DEB remains a mystery.
3. The rationality of rules of debits and credits
In addition to containing DEB, Summa includes the rules of debit and credit (RDC). However, in Summa, there is no explanation of the philosophy underlying RDC. Littleton (1928, p.136) quotes from the translation of Summa "....in the journal, per (by) was used to denote the debit and a (to) to indicate the credit” (p.26). The use of these last terms is very technical because the journal entry always takes the form:
“by Cash to Capital,” and Paciolo never attempts to clarify the underlying meaning of
“by” or “to”.” The same technicality continues to persist ....” The RDC contained in Summa remains valid today, although it has lasted more than half a millennium.
61 Several scholars have studied RDC from a mathematical perspective. Peters and Emery (1978) believe that at the time DEB was developed, mathematicians did not accept the concept of negative numbers, which led to the idea of implementing the debit-credit mechanism. However, Scorgie (1989) argues that the evidence does not support Peters and Emery's claim. Scorgie (1989) shows that the negative numbers were known before the publication of Summa. By assuming there was a Pacioli Group that operated solely with non-negative numbers, Ellerman (1985, 2014) uses an algebra model formulated in the nineteenth century to clarify the treatment of DEB.
However, there remains no elucidation of the simple rational basis for the debit-credit mechanism that is accepted by accountants.
The lack of rationale for rules of debits and credits has had a significant effect.
Most modern accounting textbooks treat RDC as arbitrary (Anthony, Hawkins, &
Merchant, 2007) rules of thumb (Williams, Haka, & Bettner, 2007) or mere customs (Weygandt, Kimmel, & Kieso, 2011; Kieso, Weygandt, & Warfield, 2011). Moreover, certain researchers claim RDC is simply “a part of the vocabulary of accounting”
(Wallace, 1997, p. 230), mere “language” (Pincus, 1997a, p. 579), or “nothing more than pluses and minuses” (Ingram, 1998 p. 411). In turn, the study of RDC is considered excessively narrow and procedural (Patten & Williams, 1990; Nelson, 1995); it requires students to memorize (Pincus, 1997a; Ingram, 1998), poses a risk of misrepresentation to students regarding accounting (Pincus, 1997a; Diller-Hass, 2004) and meets “instructors on unfamiliar turf, likely in a “land'' the students hope to visit never again.” (Warren & Young, 2012, p. 248).
This paper uses the mathematical approach to propose the rationality of RDC.
The approach is appropriate because of specific arguments, as follows. First, DEB and RDC were documented in Summa as a mathematics book compiled by a professor of mathematics. Second, scholars of several generations conclude that DEB is the application of mathematics. Cayley (1894, p. 5), as a professor of pure mathematics, states “[t]he Principles of Book-keeping by Double Entry constitute a theory which is mathematically by no means uninteresting ....” Childs (1895, p.77) states that DEB is
“...a science, in fact, based upon true mathematical principles....” Littleton (1927,
62
p.140) notes that arithmetic is an antecedent of double-entry bookkeeping “...since bookkeeping is a sequence of simple computations....” Williams (1978, p.38) concludes that the power of mathematics is “...an essential ingredient for a complete system of double-entry book-keeping.” Weis & Tinius (1991, p. 95) go further, holding that “...the Venetian method - you call it a double-entry - was an application of Arabic algebra.” Ellerman (1985, p.226), in Mathematics Magazine, states “...the double entry system is based on a well-known mathematical construction of undergraduate algebra....” Third, much evidence suggests that reliable knowledge is typically grounded in mathematics, such as the law of Pythagoras. Mathematics essentially explains the facts objectively.
Most of the accounting literature presents the basic accounting equation in the
"Assets = Liabilities + Equity", which consists of the left and right sides. The equation reflects the application of algebraic equations. Furthermore, the literature states that 'debit' means left and that 'credit' means right; bookkeeping entries are made in two sides, and debits are entered on the left side, with credits being entered on the right side. Pacioli (in Littleton 1928 and in Peters & Emery 1979) used terminologies ‘per’
(debits) and ‘a’ (credit) to refer to left and right positions. In turn, most modern accounting textbooks define debits as the left side and credits as the right side (e.g., Anthony et al., 2007; Williams et al., 2007; Weygandt et al., 2011; Kieso et al., 2011).
Thus, the definitions of debits and credits left and right, are closely related to the accounting equation as an algebraic equation.
RDC is technical. The rules are mainly used to represent the increase of (addition) and decrease (subtraction) of the assets, liabilities and equity elements in the basic accounting equation. However, it would be incorrect to conclude that the terminology of debit always means an increase (additions or pluses), or that the terminology of credit always means a decrease (subtraction or minuses). The rules for debits and credits depend on the position of the elements in the accounting equation.
For example, assets, which are positioned on the left side of the equation, are recorded (in each case by a positive number) in the debit (left) side when the assets increase and, in the credit, (right) side when they decrease. Similarly, liabilities and equity,
63 which are positioned on the right side of the equation, are recorded (in each case by a positive number) in the credit (right) side when the liabilities and equity increase and, in the debit, (left) side when they decrease.
It will be evident that an accurate balance could be constructed by making entries solely using the symbols of addition/plus and subtraction/minus (Ingram, 1998).
Therefore, why do accountants make entries on two sides using the terminology of debit and credit? The primary function of accounting is to provide financial information in which the financial measurement tool is always positive to someone; it can never be negative. The absence of a negative value in monetary units is follo wing the facts contained in that period. Littleton (1927) and Edwards (1960) confirm that a monetary unit was one of the factors encouraging the development of double-entry bookkeeping.
Consequently, the use of negative numbers to reflect the financial information is prohibited. Therefore, to record the decrease in monetary value, the early initiator of DEB originated the idea of using two sides and moving what would be a negative number on one side to the other side, where it is positive. Using this mechanism, a decrease in monetary value can be represented by a positive number that, due to the meaning of the side in which it is placed, carries with it the meaning of a decrease.
This technique is essentially a mathematics procedure.
In essence, the debit and credit mechanism represent a consequence of the algebra equation whose recording is reflected in the double entry system. To illustrate, here are examples of how approaching DEB from an algebra perspective underlies and establishes the rationality of the debit-credit mechanism in the basic accounting equation.
Case A. Assume that Assets = 10, Liabilities = 4, and Equity = 6. Applying the basic accounting equation, we obtain 10 = 4 + 6. Suppose that the net amount/balance of assets (10) is the difference between the transactions valued at plus 25 and minus 15 (25 – 15). Now, accounting does not recognize the negative number (here, -15).
Therefore, to eliminate the negative number and, at the same time, explain it, the value
64
of minus 15 on the left side must be recorded on the right side with a positive number.
Thus, the increase in assets is recorded as a debit, whereas the decrease is recorded as a credit (see Figure 1).
FIGURE 1
The Mathematics of Numbers – Debit/Left Side
Debit/Left Side Credit/Right Side
10 = 4 + 6
(+25) + (–15) Dr Cr.
25 15
The Rules of Debit and Credit for Assets Dr. Assets Cr. =
+ -
increase decrease
Case B. Assume that Assets = 10, Liabilities = 4, and Equity = 6. Applying the basic accounting equation, we obtain 10 = 4 + 6. Suppose that the net amount/balance of liabilities (4) is the difference between transactions valued at plus 18 and minus 14 (18 – 14). Now, accounting does not recognize the negative number (here, -14). Therefore, to eliminate the negative number and, at the same time, explain it, the value of minus 14 on the right side must be recorded on the left side with a positive number. Thus, the increase in liabilities is recorded as a credit, whereas the decrease is recorded as a debit (see Figure 2).
\
65 FIGURE 2
The Mathematics of Number – Credit/Right Side
Debit/Left Side Credit/Right Side
10 = 4 + 6
(+18) + (-14)
Dr. Cr.
14 18
The Rules of Debit and Credit for Liabilities
= Dr. Liabilities Cr.
- +
Decrease increase
Case C. Assume that Assets = 10, Liabilities = 4, and Equity = 6. Applying the basic accounting equation, we obtain 10 = 4 + 6. Suppose that the net amount/balance of equity (6) is the difference between transactions valued at plus 36 and minus 30 (36 – 30). Now, accounting does not recognize the negative number (here, -30). Therefore, to eliminate the negative number and, at the same time, explain it, the value of minus 30 on the right side must be recorded on the left side with a positive number. Thus, the increase in equity is recorded as a credit, whereas the decrease in equity is recorded as a debit (see Figure 3).
66 FIGURE 3
The Mathematics of Number – Credit/Right Side
Debit/Left Side Credit/Right Side
10
= 4
+
6
(+36) + (-30)
Dr. Cr.
30 36
The Rules of Debit and Credit for Equity
= Dr. Equity Cr.
- +
decrease increase
4. Discussion and conclusions
Chambers (2000) argues that reliable knowledge may occasionally be rudimentary knowledge displayed through a set of rules, maxims, precepts, or work habits; this has occurred in accounting, particularly for double-entry bookkeeping and the rules of debit and credit. The rules of debit-credit actually are grounded in reliable knowledge, which unfortunately until now, were treated merely as arbitrary customs.
This paper presents an objective rationale of the rules of debit and credit. The primary function of accounting is to present financial information using a monetary unit that does not recognize negative numbers. To avoid the use of negative values, the initiator of the double-entry bookkeeping applies the transfer mechanism from the left (debit) to the right (credit), and vice versa. This mechanism is an application of mathematics.
It is true that the debit and credit rule is essentially mechanical. Is it relevant, then, that this debit and credit rule be taught in classes of accounting principles? The rule remains relevant. First, the debit and credit rule conveys a picture to the student that accounting is based on established knowledge, particularly mathematics. Second,
67 as with computer science with its binary digits (0 and 1) and the science of electricity with its “on” and “off”, accounting is endowed with debits and credits as unique knowledge, which is used solely in accounting. Third, debits and credits can be used to enhance the concreteness of the knowledge of accounting; the study of debits and credits tangibilizes the workings of accounting. Tangibilizing the accounting mechanism is essential to help the student understand accounting topics related to keeping a journal and posting, which are indeed at the heart of accounting as an academic discipline. Fourth, because accounting students are expected to compile or construct information, not simply to use information, they must have acquired basic knowledge of data processing as useful information (Vangermeersch, 1997a). Fifth, knowledge of debits and credits encourages the student to think systematically and logically and to develop the knowledge regarding accounting dynamics as a fast- growing science through the implementation of mathematical knowledge.
The rationality of the rules of debit and credit is expected to settle the debate regarding whether the teaching of debit and credit should be eliminated from elementary accounting courses. The teaching of debit and credit should be an instrument to convey to both accounting and non-accounting students that accounting is an academic field that is grounded in well-established knowledge. Interestingly, the rules of debit and credit have been documented in academia long before the development of the airplane (the late nineteenth century or early twentieth century), the presence of the phone (the nineteenth century), and the emergence of electricity (eighteenth century) and before Isaac Newton documented the theory of gravity in the seventeenth century.
The rationality of the rule of debits and credits can be used to answer certain of the following critical issues. First, the teaching of debit and credit should no longer force students to memorize the rules and regulations because the rules can be explained in a logical and easy-to-understand manner. Prior research to test the effectiveness of traditional approaches treats the rules of debit and credit as rules to be memorized without providing the logical arguments underlying the rule. This treatment prevents the students from optimally developing critical capabilities. With
68
this treatment, the students cannot adequately comprehend the topics of discussion in the introductory accounting courses, which, in turn, leads to low student performance.
An explanation of the logical arguments underlying the credit and debit rule is expected to be easily understood and accepted by students without coercion.
Second, the ‘pluses and minuses’ approach should not be used to replace the
‘debit and credit’ approach. In this case, the ‘plus and minus’ approach is useful mainly when analyzing the transaction in which the analysis uses the accounting equation. In other words, the ‘plus and minus’ approach is the general language of communication in the process of identifying the transaction. Furthermore, the credit debit approach is essential for introducing the formal mechanisms in accounting because accounting discussion topics essentially are always concerned with the application of the rules of debit and credit. In this case, the rules of debit and credit are the specific language in many accounting processes, including the process of journaling and posting.
Third, the rationality of the rules of debit and credit can be used as the basis to re- evaluate which accounting equation is more appropriate: the conventional equation (Assets = Liabilities + Equity + Revenues – Expenses) or the fundamental equation (Assets + Expenses = Liabilities + Equity + Revenues). Currently, many accounting textbooks use conventional equations in teaching introductory accounting courses.
These textbooks generally follow the provisions on applicable accounting standards.
For practicality, Ingram (1998) treats both equations equally; both can be used. Using the philosophy that accounting does not recognize negative numbers because the monetary value is always positive, the conventional equation should not be used.
Furthermore, the use of conventional equations causes students to treat RDC as things that must be memorized. The fundamental equation is more appropriate because of the similarities in harmony with and not in violation of the prevailing philosophy in accounting. Furthermore, the fundamental equation can explain that the rules of debit and credit that apply to the elements of assets and expenses are the same because both are on the left side (debit) of the equation.
69 The rationality of the rules of debit and credit can be used to conduct a re- examination of the effectiveness of the traditional approach. The rules of debits and credits in prior research are treated as rote; this has led learners to feel alienated from accounting. Students do not enjoy the accounting learning process, which, in turn, leads to non-optimal student performance. Future research needs to examine the impact of traditional approaches and the innovative approaches as a whole (blended approach) on student performance. Both traditional and innovative approaches are complementary, not interchangeable. Thus, the learning approach in introductory accounting courses must always adopt innovative approaches while continuing to learn, in detail, the fundamental knowledge that is usually studied in the traditional approach.
References
Accounting Education Change Commission (1990). Objectives of education for accountants:
Position statement number one. Issues in Accounting Education, 5(2), 307-312.
Accounting Education Change Commission (1992). The first course in accounting: Position statement No. two. Issues in Accounting Education, 7(2), 249-251.
Aiken, M., & Lu, W. (1998). The evolution of bookkeeping in China: Integrating historical trends with western influences. Abacus, 34(2), 220-242.
Anthony, R.N., Hawkins, D.F., & Merchant, K.A. (2007). Accounting: Text and cases.
McGraw-Hill/Irwin (Singapore - International edition).
Basu, S. (2012). How can accounting researchers become more innovative?. Accounting Horizons, 26(4), 851-870.
Carruthers, B.G., & Espeland, W. N. (1991). Accounting for rationality: Double-entry bookkeeping and the rhetoric of economic rationality’, American Journal of Sociology, 97(1), 31-69.
Cayley, A. (1894). The principles of book-keeping by double entry', Cambridge: University
Press, Available at
http://ia700402.us.archive.org/9/items/principlesofbook00caylrich/principlesofbook00ca ylrich.pdf.
Chambers, R.J. (1987). Accounting education for the twenty-first century. Abacus, 23(2), 97- 106.
70
Chambers, R.J. (2000). Common sense, technology and science. Abacus, 36(3), 327-333.
Chiang, B., Nouri, H., & Samanta, S. (2014). The effects of different teaching approaches in introductory financial accounting. Accounting Education: An International Journal, 23(1), 42-53.
Childs, C.W. (1895). New essentials of bookkeeping for public schools single and double entry: Including forms and explanations of business papers', The Whitaker & Ray Co., Available at http://archive.org/details/newessentialsbo00chilgoog
David, J.S., Maccracken, H., & Reckers, P.M.J. (2003). Integrating technology and business process analysis into introductory accounting courses. Issues in Accounting Education, 18(4), 417-425.
DeMong, R.F., Lindgren Jr., J.H., & Perry, S.E. (1994). Designing an assessment program for accounting. Issues in Accounting Education, 9(1), 11-27.
de Roover, R. (1955). New perspectives on the history of accounting’, The Accounting Review, 30(3), 405-420.
Diller-Haas, A. (2004). Time to change introductory accounting. The CPA Journal, 74(4), 60- 62.
Duchac, J.E., & Amoruso, A.J. (2012). A descriptive study of institutional characteristics of the introductory accounting course. Issues in Accounting Education, 27(1), 1-16.
Edwards, J.D. (1960). Early bookkeeping and its development into accounting. The Business History Review, 34(4), 446-458.
Ellerman, D.P. (1985). The mathematics of double entry bookkeeping. Mathematics Magazine, 58(4), 226-233.
Ellerman, D. (2014). On double-entry bookkeeping: The mathematical treatment. Accounting Education: An International Journal, 23(5), 483-501.
Fisher, P.A. (2013). Changing student learning approaches in fundamental accounting education through the use of graphic organizers. Dissertation – Oregon State University, UMI Number 3574277.
Fordham, D.R., and Hayes, D.C. (2009). Worth repeating: Paper color may have an effect on student performance. Issues in Accounting Education, 24(2), 187-194.
Forrester, D.A.R. (1968). The Incan contribution to double-entry accounting. Journal of Accounting Research, 6(2), 283.
Fowler, L. (2006). Active learning: An empirical study of the use of simulation games in the introductory financial accounting class. Academy of Educational Leadership Journal, 10(3), 93-103.
71 Gleeson-White, J. (2012). Double entry: How merchants of Venice created modern finance.
W.W. Norton & Company.
Hatfield, H.R. (1924). A historical defense of bookkeeping. The Journal of Accountancy, 37(4), 241-253.
Hernandez-Esteve, E. (1994). Luca Pacioli's treatise De Computis et Scripturis: A composite or a unified work?. Accounting, Business, and Financial History, 4(1), 67-82.
Ingram, R.W. (1998). A note on teaching debits and credits in elementary accounting. Issues in Accounting Education,13(2), 411-415.
Jacobsen, L.E. (1964). The ancient Inca empire of Peru and the double entry accounting concept. Journal of Accounting Research, 21(2), 221-228.
Kats, P. (1930). A surmise regarding the origin of bookkeeping by double entry. The Accounting Review, 5(4), 311-316.
Kern, B.B. (2002). Enhancing accounting students’ problem-solving skills: The use of a hands- on conceptual model in an active learning environment. Accounting Education, 11(3), 235-256.
Kieso, D.E., Weygandt, J.J., & Warfield, T.D. (2011). Intermediate accounting: IFRS edition’, John Wiley & Sons.
Laing, G.K. (2010). An empirical test of mnemonic devices to improve learning in elementary accounting. Journal of Education for Business, 83, 349-358.
Lall Nigam, B.M. (1986). Bahi-Khata: The pre-Pacioli Indian double-entry system of bookkeeping. Abacus, 22(2), 148-161.
Lee, G.A. (1973). The development of Italian bookkeeping 1211-1300. Abacus, 9(2), 137-155.
Littleton, A.C. (1927). The antecedents of double-entry. The Accounting Review, 2(2), 140- 149.
Littleton, A.C. (1928). Paciolo and modern accounting. The Accounting Review, 3(2), 131-140.
Mann, G. (1994). ‘The origins of double-entry’, Australian Accountant, 64(6), 17-21.
Martinelli, A. (1977). Notes on the origin of double entry bookkeeping. Abacus, 13(1), 3-27.
Mattessich, R. (1989). Accounting and the input-output principle in the prehistoric and ancient world. Abacus, 25(2), 74-84.
Nelson, I.T. (1995). What's new about accounting education change? A historical perspective on the change movement. Accounting Horizons, 9(4), 62-75.
72
Nobes, C.W. (1987). The pre-Pacioli Indian double-entry system of bookkeeping: A comment’, Abacus, 23(2), 182-184.
Palm, C., & Bisman, J. (2010). Benchmarking introductory accounting curricula: Experience from Australia. Accounting Education: An International Journal, 19(1-2), 179-201.
Patten, R.J., & Williams, D.Z. (1990). There’s trouble – right here in our accounting programs:
The challenge to accounting educators’, Issues in Accounting Education, 5(2), 175-179.
Peters, R.M., & Emery, D.R. (1978). The role of negative numbers in the development of double entry bookkeeping, Journal of Accounting Research, 16(2), 424-426.
Pincus, K.V. (1997a). Is teaching debits and credits essential in elementary accounting?. Issues in Accounting Education, 12(2), 575-579.
Pincus, K.V. (1997b). Reply. Issues in Accounting Education, 12(2), 585.
Rabinowitz, A.M. (2009). Who was Luca Pacioli?. The CPA Journal, 79(2), 12-14.
Rankin, M., Silvester, M., Vallely, M., & Wyatt, A. (2003). An analysis of the implications of diversity for students’ first level accounting performance. Accounting and Finance, 43, 365-393.
Rankine, G., & Stice, E.K. (1994). Using articles from the popular press in the introductory accounting course. Issues in Accounting Education, 9(1), 143-150.
Sangster, A., Stoner, G. N., & McCarthy, P.A. (2007). Lessons for the classroom from Luca Pacioli. Issues in Accounting Education, 22(3), 447-457.
Saudagaran, S.M. (1996). The first course in accounting: An innovative approach. Issues in Accounting Education, 11(1), 83-94.
Scorgie, M.E. (1989). “The role of negative numbers in the development of double entry bookkeeping”: A comment. Journal of Accounting Research, 27(2), 316-318.
Springer, C.W., & Borthick, A.F. (2004). Business simulation to stage critical thinking in introductory accounting: Rationale, design, and implementation. Issues in Accounting Education, 19(3), 277-303.
Vangermeersch, R.G. (1997a). Dropping debits and credits in elementary accounting: A huge disservice to students. Issues in Accounting Education, 12(2), 581-583.
Vangermeersch, R.G. (1997b). Rebuttal. Issues in Accounting Education, 12(2), 587.
von Goethe, J.W. (1795). Wilhelm Meister’s apprenticeship. Available at:
http://www.bartleby.com/314/110.html.
Wallace, W.A. (1997). Where are the debits and credits? Editor’s perspective. Issues in Accounting Education, 12(1), 229-230.
73 Warren, D.L., & Young, M.N. (2012). Integrated accounting principles: A best practices course
for introductory accounting. Issues in Accounting Education, 27(1), 247-266.
Waymire, G. (2012). Seeds of innovation in accounting scholarship. Issues in Accounting Education, 27(4), 1077-1093.
Weis, W.L., & Tinius, D.E. (1991). Luca Pacioli: Renaissance accountant. Journal of Accountancy, 172(5), 95-102.
Weygandt, J.J., Kimmel, P.D., & Kieso, D.E. (2011). Financial accounting: IFRS edition’, John Wiley & Son.
Williams, J.J. (1978). A new perspective on the evolution of double-entry bookkeeping. The Accounting Historians Journal, 5(1), 29-39.
Williams, J.R., Haka, S.F., & Bettner, M.S. (2007). Financial & managerial accounting: The basis for business decisions’, McGraw-Hill/Irwin (Singapore - International edition), 2007.
Williams, D.Z., & Sundem, G.L. (1990). Grants awarded for implementing improvements in accounting education. Issues in Accounting Education, 5(2), 313-329.
Williams, D.Z., & Sundem, G.L. (1991). Additional grants awarded for implementation of improvements in accounting education. Issues in Accounting Education, 6(2), 315-330.
Williams, D.Z. (2011). A half century of close encounters with the first course in accounting.
Issues in Accounting Education, 26(4), 759-776.
Yamey, B.S. (1947). Notes on the origin of double-entry bookkeeping. The Accounting Review, 22(3), 263-272.
Yamey, B.S. (1994). Accounting in history. The European Accounting Review, 3(2), 375-380.
Zaid, O. A. (2000). Were Islamic records precursors to accounting books based on the Italian method?. The Accounting Historians Journal, 27(1), 73-90.
74
