Abstract ABSTRACT: An exposition of the principles of division, nomenclature, and definition is undertaken, as synthesized from other disciplines such as logic, biology and social science. Applying these principles to the credit side of a balance sheet it becomes clear that the existing basis of classification for the credit side and its coordinate subdivisions is deficient. The concept of equity does not provide a basis for articulating categories that are exhaustive and mutually exclusive. The rationale explaining these categories is contradictory, internally inconsistent and invalid. A proposal is made for a new basis of classification. It is based upon a pervasive characteristic possessed by all items on the credit side of a balance sheet; they represent sources of capital invested in recorded assets. Sources of capital are in turn, demarcated into transitory and standing sources.
Richard A. Scott (Mon,) studied this question.