Time and space in income accounting

Inspired by the work of DR Scott, we explore the formation of an internal logic of income accounting that bestows upon the income accounting system an institutional status. As large scale modern corporations emerged in the market, imaginative ways of doing income accounting were developed and exercised in the 19th century. Creative accounting practices of the time were eventually evolved into what is now known to be the accrual process. A distinctive feature of the accrual accounting system, that has the accrual process as its essential part, is that it creates internal space demarcated (de-marketed) from the external world. In the demarcated space of the accrual accounting system, “the Emptying-out of Internal Transaction Time” takes place. Internal transactions enable the accrual accounting system to generate smoothed income series out of cashflow chaos, which function as an “attractor” in the complex relationships between managers and stakeholders. Creative accounting practices induced phase transition so as to establish the accrual accounting system as a legitimate social institution.