Accounting and Economics: A Note With Special Reference to 'The Teaching of Social Accounting'

Abstract This article focuses on the relationship between accounting and economics. There are at least two, perhaps three, main areas of economic theory. One is microeconomic theory, in which the unit of analysis is relatively small, the central problem is the allocation of scarce resources among alternative uses, and the principal variables are quantities and prices of factors of production and finished products. The second area is macroeconomic theory in which the unit of analysis relatively large, the central problem is the level of employment of resources, and the principal variables are employment, national income, money, interest, and aggregate consumption, savings, and investment. The usefulness of economic theory is not limited to its applied aspects in social accounting. Such theory obviously has a substantial import apart from social accounting. Accounting for monetary phenomena sometimes takes the form of accounting for flows, sometimes of accounting for stocks. Irving Fisher's theory stressed the matching of money flows against the transactions of real goods and services. Keynes' monetary theory stressed the liquidity preferences of holders of money balances.