Is Accounting a Measurement
Discipline?
Don W. Vickrey
I
N RECENT years, accounting academi-
cians have devoted substantial atten-
tion to the relationship between mea-
surement theory and accounting.
Chambers, Ijiri, Larson, and Mattessich
have all expressed sophisticated views
concerning the logic of accounting mea-
surement.^ Accordingly, accounting is often
referred to as a measurement discipline.*
Despite the numerous attempts, an ade-
quate theory of accounting measurement
has not been articulated; the various
authors typically have ignored or have
had misconceptions about the conditions
a measurable property must satisfy.' The
inefficacy of these eminent theoreticians
raises a question that is critical to ac-
counting. Is accounting a measurement
discipline? This question is of paramount
importance because if accounting is not a
measurement discipline, we may be forced
to abandon our attempts to apply mea-
surement theory to accounting and we may
have to focus our attention in other direc-
tions to improve and to explain account-
ing. Thus, the principal objective of this
paper is to identify the necessary and
sufficient conditions for classifying ac-
counting as a measurement discipline.
Subsidiary, albeit important, goals are
demonstrating how these conditions can
be realized, presenting implications for
accounting theory concerning the realiza-
tion of the conditions, and identifying the
731
types of measurement which currently
exist in accounting. As background for
accomplishing these objectives, the next
section of the paper provides a brief over-
view of measurement theory. The third
section identifies the necessary and suffi-
cient conditions for classifying accounting
as a measurement discipline and indicates
the benefits which may accrue to account-
ing if the conditions are realized, while the
fourth subdivision identifies one method of
producing the conditions and presents
implications for accounting if the condi-
tions cannot be realized. The last section
provides a summary of the paper and final
conclusions.
AN OVERVIEW OF
MEASXJREMENT THEORY
A typical definition of measurement is
"the assignment of numerals to objects
or events according to rules."^ Definitions
' See bibliography for references to the principal
works of these authors related to measurement theory.
' For purposes of this paper, a measurement discipline
is any discipline which makes extensive use of an
ordinal, interval, or ratio scale.
' Exceptionally, Larson and Chambers have indi-
cated that additivity is the key to accounting measure-
ment, cf., Kermit D. Larson, "Descriptive Validity of
Accounting Calculations," THE ACCOUNTING REVIEW
(July 1967), pp. 480-488 and R. J. Chambers, Account-
ing, Evaluation and Economic Behavior (Prentice-Hall,
Inc., 1966), pp. 89-96.
' S. S. Stevens, "On the Theory of Scales of Measure-
ment," Science (June 7, 1946), p. 677.
Don W. Vickrey is Instructor of Account-
ing at The University of Texas at Austin.
732
such as this one are deficient for several
reasons. First, the definition does not indi-
cate that measurement is frequently con-
cerned with the assignment of numerals to
represent properties of empirical phe-
nomena, such as the assignment of the
numeral 5 to represent the length in feet
of a particular object. In addition, the
definition places no restrictions on the
rules which can be used in making numeri-
cal assignments. For example, the rule,
assign the numeral 3 to represent the
mass in pounds of all objects, is a possible,
but untenable, rule of measurement under
the typical definition. A more satisfactory
definition of measurement is the assignment to N*'. An example of a subsystem of a fuU
of numerals to represent elements or a proper- NRS is 5*= (5*', <) in which S*' is the
ty of elements in a specified system on the
basis of isomorphism or homomorphism
existing between one or more empirical rela- representation theorem for an ERS
tional systems {ERS) and one or more nu-
merical relational systems (NRS). Defining assignment of the numerals within the re-
measurement in this manner overcomes
the objections mentioned above and in-
sures that measures obtained via the
various scales will be informative and
consistent.^ Two classes of measurement
are encompassed by the improved defini-
tion of measurement above: (1) fundamen-
tal measurement® and (2) derived mea-
surement.
Fundamental measurement is the as-
signment of numerals to represent ele-
ments and properties of elements in
represented ERS's.' An ERS is a rela-
tional system A = (A', Ri,. . . , Rn) in
which the domain .4' is a nonempty set of
extramathematical elements and i?i,. . . ,
i?n are relations on A'. For example, the
ERS ilf = (M', 60 is a system in which M'
is the set of all minerals which possess
hardness and S means is scratched by. An Robert
ERS is represented if and only if a mathe-
matical representation theorem has been
proved for the system. A representation
theorem demonstrates mathematically
that if the elements of A' satisfy a specified and infinite denumerable domains.
The Accounting Review, October 1970
set of axioms, a function / exists which
maps A homomorphically (a many-to-one
mapping) or isomorphically (a one-to-one
mapping) onto some subsystem of an
appropriately chosen full NRS. A full
NRS N=iN', Ri,. . . , i?») is a relational
system in which the domain N ' is the set
of all real numbers and i?i,. . . ,Rn are
relations on N', and a full NRS is appropri-
ate if and only if the relations within the
system are simple and familiar ones, such
as=, <, >, and -f.* A subsystem
N*=iN*', Rl,. . .,i?«) of N is established
by designating a subset N*' of N' as a do-
main and restricting the relations on N'
set of aU positive integers and < is the bin-
ary precedence relation less than. Once a
A = {A', Ri,. .. ,Rn) has been proved, the
lated numerical subsystem to represent
the elements of A' or some specified
property of the elements of .4' is justified
and a scale for the measurement of A has
been established; the numerals within the
subsystem are the scale's numerals and
' cf., Brian Ellis, Basic Concepts of Measurement (The
Syndics of the Cambridge University Press, 1966), pp.
39-41 for an analysis related to the information content
and the consistency of measures.
* The term, fundamental measurement, was used
originally by Norman R. Campbell in Physics: The
Elements (Cambridge University Press, 1921) (re-
printed as Foundations of Science (Dover Publications,
Inc., 1957)) to refer to the measurement of additive
properties. Throughout the years, many writers have
used the term in the Camphellian sense. As is explained
below, fundamental nieasurement is used in a much
broader manner in this paper.
' A substantial portion of the remainder of this sec-
tion is adapted from Patrick Suppes and Joseph L.
Zinnes, "Basic Measurement Theory," Handbook of
Mathematical Psychology, Vol. 1 (eds. R. Duncan Luce,
R. Bush, and Eugene Galanter; John Wiley
and Sons, Inc., 1963), pp. 1-76.
' Suppes and Zinnes, Ibid., p. 8, indicate that a com-
plete listing of simple and familiar relations is elusive.
The relations must be simple and familiar because repre-
sentations made on the basis of unnatural relations
have little information content; many unnatural repre-
sentations are possible, especially with respect to finite
Vickrey: Accounting—A Measurement Discipline?
FIGURE 1
FAMILIAR SCALE T Y P E S : T H E I R USES AND APPLICATIONS OF ARITHMETIC
Uses and Applications of Arithmetic
Absolute
Determination of Equality (o56)
Determination of Rank Order (agi)
Determination of Equality of Intervals (afJ and
\a-b\S\c-d\)
Determination of Equality of ratios [a/bfc/d)
Determination of Numerosity (Numerosity is the
attribute of a collection measured by counting)
the function / is the scale's numerical
assignment. A numerical assignment is a
function which assigns the numerals with-
in a numerical subsystem to the elements
or some specified property of the elements
in an ERS so that isomorphism or homo-
morphism is maintained between the ERS
and the subsystem.
A scale of fundamental measurement is
an ordered triple, such as {A, N, / ) , in
which A is an ERS, N is an appropriately
chosen full NRS, and / is the scale's
numerical assignment. Since essentially
different functions may map an ERS onto
different subsystems of the same full NRS,
more than one scale of the same type with
different numerals for the measurement
of the elements of the same ERS is
possible (e.g., {A,N, g) and {A, N, h). Fre-
quently encountered scale types used in
fundamental measurement are the nomin-
al, interval, ordinal, ratio, and absolute.
The uses of these scale types and the
applications of arithmetic they represent
overlap to a considerable extent as is
shown in Figure 1.®
To determine the scale type of any scale
for fundamental measurement {A, N,f),
a uniqueness theorem must be proved. A
uniqueness theorem identifies the type of
transformation function 0 (the admissable
transformation) which relates any two
733
Scale Type
Nominal Ordinal Interval Ratio
X X X X
X X X
X X
X
X
subsystems of N which are homomorphic
or isomorphic to A. For example, if any
two subsystems which meet the criteria
above are related by a positive linear trans-
formation, (il, N,f) is an interval scale.'
The proof of a uniqueness theorem is
equivalent to identifying all possible scales
for the measurement of the elements of a
given ERS whose numerals come from the
same full NRS and determining the type
of transformation which can be used to
transform any of the scales' numerals into
those of any other scale. The admissable
transformations of the various familiar
scale types form an interesting hierarchy
as is demonstrated by Figure 2.
As a practical matter, representation
and uniqueness theorems do not have to
be proved whenever a new ERS is to be
subjected to measurement since they have
been proved for most, if not all, important
types of ERS (e.g., classificatory systems,
series, quasi-series, infinite difference sys-
tems, and extensive systems); all that is
necessary is the identification of the set(s)
' The phrase "application of arithmetic" alludes to
the relations which can be identified as holding between
elements of the domain of applicability from the rela-
tions between the numerals assigned to the elements.
For example, if the numerals 3 and 5 are assigned to
minerals A and B, respectively, by way of Moh's
ordinal scale of hardness, we know that mineral A is
less hard than mineral B.
 734
FiGUEE 2
SCALE TYPES AND THEIR ADMISSABLE
TRANSFORMATIONS
Scale Type Admissable Transformation
Nominal One-to-one transformation (Any one-
to-one substitution)
Ordinal Strictly monotonic increasing transfor-
mation (For all numerals x and y on a
scale, if x<y, then <^(«)<0Cy).)
Interval Linear transformation (For all nu-
merals » on a scale, 0(a;) = ax-^J where
a is positive.)
Ratio Similarity transformation (For all nu-
merals a; on a scale, i^(a;) = ax where a is
positive.)
Absolute Identity transformation (For all nu-
merals a; on a scale, 4>ix) = x)
of axioms the new system satisfies. If
the new system is known to obey a set(s)
of axioms for which representation and
uniqueness theorems have been proved,
the previously proved theorems can be
applied to the new system. Because of these
theorems, the identified set(s) of axioms
is sufficient to identify (1) the numerical
subsystems which are homomorphic or
isomorphic to the new ERS, (2) the com-
ponents of any scale for the measurement
of the system, including the full NRS, the
numerals, and the numerical assignment,
and (3) the scale type(s) of the identified
scale(s). For example, an extensive system
is an ERS A = (A', E, 6) in which E is a
transitive, antisymmetrical, and strongly
connected relation analogous to less than
or equal io and o is a binary operation from
A'XA' to A' analogous to plus. Measure-
ment of extensive systems is possible if an
empirical operation can be found which is
capable of demonstrating that the ele-
ments of A' satisfy some set of axioms of
extensiveness^" with respect to the stipu-
lated property. With regard to one such
set of axioms, the operation must be such
that for all x, y, and z within A':
The Accounting Review, October 1970
(1) If xEy and yEz, then xEz (E is
transitive.).
(2) (xoy)ozExo(yoz) (o is associative.).
(3) If xEy, then xozEzoy.
(4) If not xEy, then there is a z in .4'
such that xEyoz and yozEx (A' is
infinite and is closed under addition
of the stipulated property and under
the subtraction of smaller amounts
of the property from larger amounts
of the property.).
(5) Not xoyEx (The property is always
positive.).
(6) If xEy, then there is a number n
such that yEnx where nx is defined
recursively as lx=x&ndnx= ((«—1)
x)ox (An Archimedian axiom).
From previously proved representation
theorems, we know that any ERS which
satisfies the axioms above is homomorphic
to an infinite denumerable or nondenumer-
able numerical extensive system, depending
on whether the ERS is denumerable or
nondenumerable. A numerical extensive
system N*=(N*', ^ , -1-) is a system in
which N*' is a nonempty set of real num-
bers dosed under addition and the sub-
traction of smaller numbers from larger
numbers (i.e.. For all x and yinN*' where
x>y, x+y and x—y are also in N*') and
in which ^ means less than or equal to and
-|-is the binary operation of addition.
Knowledge of the homomorphic subsys-
tem(s) is sufficient to identify the numer-
als of the related scale(s) and to ascertain
the parent full NRS. Similarly, prior
uniqueness theorems indicate that any two
numerical extensive systems which are
homomorphic to the same extensive sys-
tem are related by a similarity transforma-
tion. Thus, the measurement of extensive
'" The cixioms below are taken from Suppes and
Zinnes, Ibid., p. 42. For similar sets of axioms for ex-
tensive systems, see Ellis, op. cit., pp. 74-76 and Carl
G. Hempel, Fundamentals of Concept Formation in
Empirical Science (The University of Chicago, 1952),
pp. 65-^6.
Vickrey: Accounting—A Measurement Discipline?
systems via numerical extensive systems
takes place on ratio scales. Of course, the
numerical assignment of any ratio scale
for the measurement of an extensive sys-
tem requires that the numerals from the
related subsystem be assigned in a manner
such that homomorphism is maintained
between the extensive system and the
subsystem.
In contrast to fundamental measure-
ment, derived measurement is the assign-
ment of numerals to represent properties
of elements within derived measurement
systems (DMS). A DMS A = {A', Mi,. . . ,
Mn) is a system in which the domain A'
is a nonempty set of elements which
possess a specified property and Mi,.. . ,
Mn are measures of other properties (very
frequently extensive properties) connected
in some manner with the elements oi A'.
A scale for derived measurement is a
triple, such as (.4, R, f) in which A is the
DMS, R is the representing relation, and
/ is the derived numerical assignment. The
representing relation R identifies the rela-
tion between Mi,. . . ,Mn and / . An
example of a derived scale is the scale
{B, R, d) for the measurement of density;
B is the DMS (B', m, v) in which m
means mass and v means volume and R
defines the derived numerical assignment
d as m/v for every element within B'. The
scale type of a derived scale is identified
by the transformation 0 which relates the
derived numerical assignments of any two
scales for the measurement of the ele-
ments of the same DMS.
As the analyses of fundamental and de-
rived measurement above indicate, mea-
surement theory imposes a strict require-
ment on any discipline which aspires to be
classified as a measurement discipline.
The aspiring discipline must demonstrate
as a minimum that some of its phenomena
satisfy axioms which lead to the extensive
use of an ordinal, interval, or ratio scale.
Whether or not accounting satisfies or is
735
capable of satisfying this requirement is
the subject of the next section.
THE NECESSARY AND SUFFICIENT
CONDITIONS FOR CLASSIFYING
ACCOUNTING AS A MEASUREMENT
DISCIPLINE
Various authors have claimed that
nominal, ordinal, interval, and ratio scales
are being used extensively in accounting.
The majority of these claims are inap-
propriate since the systems ostensibly
measured are not isomorphic or homo-
morphic to subsystems of appropriately
chosen full NRS's. One exception, how-
ever, is the measurement of classificatory
systems. A classificatory system is a sys-
tem {A', C) in which C is a binary equiv-
alence relation on .4'. Examples of equiv-
alence relations are is equal to, has the
same mass as, and is the same height as.
Measurement of classificatory systems is
possible by way of nominal scales if an
operation has been identified which is
capable of demonstrating that for all
X, y, and z in ^4':
(1) xCx (C is reflexive.).
(2) If xCy, then yCx (C is symmetrical.).
(3) If xCy and yCz, then xCz (C is
transitive.)."
In accounting classification, the ERS's
subjected to measurement are systems
such as (A', B) in which domain A' con-
sists of the individual accounting phe-
nomena of separate accounting entities
(e.g., a machine, a dollar, and a promissory
and B is the binary relation belongs
" Suppes and Zinnes, Ibid., p. 23.
'* The phenomena of accounting must be considered
to be items, such as machines, if the procedures of
fundamental measurement are to be utilized in account-
ing since the theory of fundamental measurement re-
quires that the domains of ERS's consist of identifiable
objects. This statement does not mean that the measure-
ment of "flows" (as opposed to "states") is inappro-
priate. Actually, information demands may require
that both flows and states be measured since only net
flows can be determined using the comparative statics
approach and since certain changes in states cannot be
derived from an analysis of flows.
736 The Accounting Review, October 1970

FIGURE 3 FIGURE 4
NOMINAL SCALES DERIVED FROM A TYPICAL A TYPICAL PARTIAL CHART OE ACCOUNTS
PARTIAL CHART or ACCOUNT
X Y Z Company
Partial Chart of Accounts
Nominal Scale Account
Account Numbers and Number Account
Account Titles 1 2 3 4 5 1. Balance Sheet (a)
1.0 Assets (b)
1. Balance Sheet X 1.00 Current Assets (c)
1.000 Cash(d)
1.0 Assets X 1.001 Inventories (e)
1.0010 Finished Goods Inventory (f)
1.00 Current Assets X 1.0011 Work-in-process Inventory (g)
1.0012 Raw Materials Inventory (h)
1.000 Cash X X 1.01 Investments (i)
1.1 Liabilities (j)
1.001 Inventories X 1.2 Owners' Equity (k)
2. Income Statement (1)
1.0010 Finished Goods
Inventory X
considered to be single nominal scales be-
1.0011 Work-in-process
Inventory X cause of the requirement that scales used
to measure classificatory systems partition
1.0012 Raw Materials
Inventory X the elements of the systems into mutually
— exclusive classes. Numerous nominal scales
1.01 Investments X X X can be derived from even the simplistic
1.1 Liabilities X X X X partial chart as Figure 3 illustrates. In
1.2 Owners'Equity X X X X
the figure, the X's indicate which account
numbers and account titles appear on the
2. Income Statement X X X X X various scales.
While classification serves numerous
functions in accounting and in other disci-
io the same mutually exclusive class as.
plines, its identification as a measurement
Class membership is determined with the
process is often questioned. In general,
chart of accounts, a complicated and
these debates occur because classification
individualized configuration of nominal
is arbitrary and rarely deals exclusively
scales used to assign numerals (account
with quantities." Because classification is
numbers) as well as account titles to the
a dubious measurement process, it is
individual phenomena. Although not usu-
neither necessary nor sufficient to identify
ally recognized as such, stipulative ac-
accounting as a measurement discipline.
counting definitions and lexical defini-
tions^' are nonintegral components of " Essentially, a stipulative definition asserts that a
charts of account since they provide the specified phrase (the definiendum) is to be synonymous
charts and their constituent scales with with another phrase (the definiens) whose meaning has
already been determined, while a lexical definition (a
their classificatory power. For example, a typical dictionary definition) provides a report on the
stock certificate is classified as an invest- way a word has been used or should have been used by
a specified group of persons in the past, cf., Richard
ment only if it satisfies the accounting Robinson, Definition (Oxford University Press, 1950)
definition of an investment. Theoretically, and Carl G. Hempel, Philosophy of Natural Science
(Prentice-Hall, Inc., 1966), p. 85.
the classification of the certificate could " cf., Stevens, op. dt., p. 679, Carl G. Hempel, Funda-
be made via many of the nominal scales mentals of Concept Formation in Empirical Science (The
University of Chicago, 1952), p. 50, Ellis, op. cit., pp.
composing the related chart of accounts. 42, 43, and 59, and Ernest Nagel, "Measurement,"
Charts of account, such as the partial Philosophy of Science (eds. Arthur Danto and Sidney
Morgenbesser; The World Publishing Company, 1960),
chart illustrated in Figure 4, cannot be p. 126.
Vickrey: Accounting—A Measurement Discipline?
Another scale which is used in account-
ing to a limited extent is the ordinal scale.
As Mattessich has indicated, if the
numerals assigned to the classes on a
typical chart of accounts constitute a
place-value system similar to the decimal
system, ordinal scales for determining
classes and subclasses are established.^^
While this contention is correct with re-
spect to a limited number of combinations
of several account numbers, the numbers
on typical charts of account when con-
sidered all together do not constitute
ordinal scales. The existence of an ordinal
scale depends entirely on the existence of
a series or a quasi-series,^® and the classes
on the typical chart of accounts constitute
neither a series nor a quasi-series. Only
the requirements for quasi-series are con-
sidered below in clarifying this point since
the classes on charts of account resemble
quasi-series more closely than series.
A quasi-series is an ERS {A', C, P) in
which C is an equivalence relation and P
is a binary precedence relation, such as is
shorter than or is less heavy than, that can be
shown to satisfy the set of axioms below
for all X, y, and z in ^1'.
(1) a;Ca;(C is reflexive.).
(2) If xCy, then yCx (C is symmetrical.).
(3) If xCy and yCz, then xCz (C is
transitive.).
(4) If xPy and yPz, then xPz (P is
transitive.).
(5) xPy or yPx or xCy ("or" in the
exclusive sense)."
The classes on the typical chart of accounts
do not satisfy these axioms. Consider
the partial chart of accounts in Figure 4
along with the equivalence relation is a
proper subset of the same set{s) as and the
pseudo precedence relation is a proper
subset of. With respect to the classes on the
chart, all the axioms for quasi-series are
satisfied except for (5); neither xPy, yPx,
nor xCy holds for every ordered pair of
737
classes on the chart (e.g., neither (d)P(f),
(f)P{d), nor id)C(J) and neither (e)P(i),
li)P(e), nor (e)C(i)). Since the classes on
the chart along with the relations specified
above do not constitute a quasi-series,
they cannot be mapped homomorphically
onto a numerical series.^* Thus, the nu-
merals on typical charts of account are not
components of ordinal scales for deter-
mining classes and subclasses whether they
constitute place-value systems or not.
As indicated above, the use of ordinal
scales in accounting in connection with
charts of account is seriously limited.
In addition, this use exemplifies a trivial
type of measurement at most. For these
reasons, the use of ordinal scales related
to charts of account is neither necessary
nor sufiicient to identify accounting as a
measurement discipline.
The nonexistence of other ordinal scales,
interval scales, and ratio scales in account-
ing is evident from the conspicuous ab-
sence of empirical operations which are
capable of demonstrating that accounting
phenomena satisfy appropriate axioms
with respect to one or more properties
which are measurable in monetary units
and which are acceptable for accounting
measurement. Furthermore, such measur-
ing operations cannot be specified for the
conventional accounting process. Since
'* Richard Mattessich, Accounting and Analytical
Methods (Richard D. Irwin, Inc., 1964), pp. 61-63.
" The term "quasi-series" was used first by_ Hempei,
op. cit., p. 60, to refer to an order which is serial except
that more than one element can occupy the same posi-
tion. See Suppes and Zinnes, op. cit., pp, 23-29 for an
excellent analysis of quasi-series, including proofs of
representation and uniqueness theorems.
" These axioms are essentially the same as those pre-
sented in Suppes and Zinnes, op. cit., p, 23. See Hempei,
op. dt., p, 59 for a similar set of axioms,
1' To produce an ordinal scale, the elements of a
quasi-series rnust he mapped homomorphically onto a
numerical series. A numerical series is a NRS iN*', <)
in which < means less than and which satisfies the set
of axioms below for all x, y, and z in N*'.
(1) If x<y, then not y<x (< is asymmetrica.1.).
(2) If *<y and y<z, then a;<z (< is transitive.).
(3) If X9^y, then either x<y or y<x (< is con-
nected,).
738
these operations have not been and cannot
be specified for conventional accounting,
the isomorphisms or homomorphisms be-
tween accounting phenomena and ap-
propriate numerical subsystems required
by measurement theory have not been and
cannot be established. Without the requi-
site isomorphisms or homomorphisms,
measurement theory indicates that scales
of measurement cannot be defined and
that no measurement can occur. There-
fore, the conventional accounting process
is capable of producing no theoretically
sound measures via ordinal, interval,
or ratio scales. Since none of these scale
types is being used extensively in account-
ing, accounting cannot be classified cur-
rently as a measurement discipline in the
strict sense required by measurement
theory. The analysis of the similarity
between several accounting quasi-mea-
surements^' and theoretically sound mea-
surements from the physical sciences be-
low will provide background for identify-
ing the necessary and sufficient conditions
for accounting being classified as a mea-
surement discipline.
When the accountant assigns an his-
torical cost to an individual asset, his
quasi-measurement is similar to the funda-
mental measurement of the mass of an
object. Similarly, when accountants de-
termine total assets, their calculations
are similar to adding the masses of various
objects to obtain the combined mass of the
objects. Calculation of the current ratio
resembles the derived measurement of
density, while average velocity when de-
fined as the quotient of the distance
traveled and the length of time traveled
bears a likeness to earnings per share.
Many more parallels between accounting
quasi-measurements and physical science
measurements can be drawn.
An examination of the physical science
measurements above reveals one com-
mon characteristic of paramount impor-
The Accounting Review, October 1970
tance. Ultimately, the logic and usefulness
of these measurements depend on the
additivity of extensive properties. For
example, adding the masses of individual
objects to obtain the combined mass of
the objects would be meaningless if mass
were not additive. In a similar manner,
all accounting calculations depend ulti-
mately on addition. This strong super-
ficial resemblance between accounting
quasi-measurements and theoretically
sound fundamental measurements of ex-
tensive systems and theoretically sound
derived measurements which depend on
extensive properties indicates that the
additivity of extensive properties is the
key to accounting measurement. Unfor-
tunately, the property accountants os-
tensibly measure, historical cost, is not
extensive.^" The nonextensiveness of his-
torical cost is the reason accounting calcula-
tions are merely quasi-measurements.
The necessary and sufficient conditions
for accounting being classified as a mea-
surement discipline can now be stated.
Assuming accountants wish to represent
economic facts about accounting entities
by assigning monetary amounts to ac-
counting phenomena and aggregating
these amounts as they have done histor-
ically, accounting is a measurement disci-
pline if and only if at least one extensive
economic property is identified which (1)
is possessed by accounting phenomena,
(2) is measurable in standard monetary
units, and (3) is accepted by accountants
as appropriate for accounting measure-
ment. If such an accounting property can-
not be identified, we must conclude that
accounting can never be classified as a
measurement discipline in the strict sense.
If an extensive accounting property
" A quasi-measurement is a process which bears otdy
superficial resemblance to theoretically sound measure-
ment procedures,
'" Of course, historical cost is not even a property in
the same sense that mass, length, and volume are
properties of empirical phenomena.
Vickrey: Accounting—A Measurement Discipline?
is identified, many benefits could accrue
to accounting. First, identification of the
property could serve to explicate account-
ing concepts. For example, if purchasing
power, which is defined as the ability of
an object to command other objects and ser-
vices in exchanges, is shown to satisfy
the conditions above, more precise defini-
tions of accounting concepts could be
formulated.^^ Periodic income could be
defined as the increase in the residual
purchasing power of the accounting entity
over a specified period of time (making
allowance for additional investment and
dividends). Financial position could be
defined as the ability of the accounting entity
to command goods and services in exchanges,
and financial accounting could be defined
functionally as an empirical science the
purposes of which are to measure the pur-
chasing poiver and the changes in the pur-
chasing power of accounting entities and to
communicate the resulting measures to loth
internal and external decision makers.
Next, identification of an extensive
accounting property could provide criteria
for choosing between conventional al-
ternative accounting principles and pro-
cedures. In other words, the cost, in terms
of time and resources, of measuring an
extensive accounting property each time
financial statements are to be prepared
probably would be exorbitant f^ therefore,
accountants would be forced to account
much as they have in the past with one
major exception; the principles and pro-
cedures they would employ would be
those judged to more closely approximate
measures of the relevant property, assum-
ing the cost of implementing the principles
and procedures would not exceed the bene-
fit from their use.^^ Again, assuming the
extensiveness of purchasing power, in
historical costing, we would choose "fifo"
over "lifo" since "fifo" produces balance
sheet dollar assignments which more
nearly approximate purchasing power.
739
Similarly, in choosing a depreciation
method for a particular asset, the accoun-
ant would choose the method which is
believed to parallel more closely the de-
cline in the purchasing power of the asset.
Of course, replacement price presumably
would be chosen over historical cost.
Thus, in Ijiri's terms, accountants would
be using surrogates of surrogates to repre-
sent various principals.^* For example,
accountants might represent the ability
of accounting entities to command goods
and services in exchanges (financial posi-
tion) with replacement costs, which are
substitutes for more expensive measures
of purchasing power.
Last, the benefits mentioned above
along with the identification of accounting
as a measurement discipline could have
important pedagogical implications. The
explicated concepts and the identified
relationship between accounting and mea-
surement theory would allow us to convey
clearly the objectives of accounting and
would allow us to teach accounting from a
more conceptual and a more theoretical
point of view, including instruction in at
least the rudiments of measurement the-
ory. The identification of criteria for choos-
ing between alternative principles and
procedures would be indispensible in ex-
plaining accounting methodology and in
indicating the circumstances under which
alternative methods are preferred. In
combination, these points indicate that
identification of an extensive accounting
^' If purchasing power is to be measured in monetary
units, changes in the purchasing power of the monetary
units must be allowed for in order to relate measures of
purchasing power obtained at different times.
^ These costs would at least equal the costs of measur-
ing the masses, lengths, or volumes of the assets of the
accounting entity each timefinancialstatements are to
be prepared.
-' Naturally, the cost of implementing principles and
procedures and the benefit derived from their use cannot
be ascertained. Nevertheless, accountants would be
forced to make judgements of this type as a prelude to
choosing their methods.
'^ Yuji Ijiri, The Foundations of Accounting Measure-
ment (Prentice-Hall, Inc., 1967), Chapter I.
 740
property would enable us to explain more
lucidly and with greater consistency the
purposes, procedures, limitations, and
theoretical foundation of accounting there-
by enhancing the attractiveness, useful-
ness, and prestige of our discipline. Com-
ments concerning the identification of
such a property are presented below.
THE IDENTIFICATION OJF
EXTENSIVE ACCOUNTING PROPERTIES
One approach to identifying extensive
properties for accounting measurement
is apparent from an analysis of existing
procedures for measuring extensive sys-
tems. When we say an object is 5 inches
in length, we are really saying that the
ratio of the object to a standard unit of
measure called the inch is five to one with
respect to length. Similar statements can
be made about other procedures for
measuring extensive systems. Since the
measurement of extensive systems in-
volves comparison of the elements within
the domain of applicability with standard
units of measure, it is clear that the stand-
ards, such as the inch, the foot, the gram,
and the pound, must possess the property
being measured. Thus, there are two steps
in realizing the necessary and sufficient
conditions for accounting being classified
as a measurement discipline. First, we
must identify economic properties (e.g.,
purchasing power and utility) that are
possessed by both standard monetary units
and accounting phenomena. Second, we
must specify measoring operations which
can be used to determine whether account-
ing phenomena which possess the identi-
fied properties satisfy axioms of extensive-
ness. Evidently, attempts to identify
extensive accounting properties will be
futile since we lack satisfactory measuring
instruments; other than human beings,
we know of no instrument, such as the
balance, which is capable of indicating
whether or not accounting phenomena
The Accounting Review, October 1970
satisfy axioms of extensiveness with re-
spect to economic properties. The defi-
ciencies of human instruments are well
known. As Hempel indicates,
. . . The use of human instruments of comparison
has various disadvantages, however, over the
use of nonorganismic devices such as scales,
yardsticks, thermometers, etc.: Interobserver
agreement is often far from perfect, so that the
"yardstick" provided by one observer cannot be
duplicated; besides, even one and the same ob-
server may show inconsistent responses. In ad-
dition, it appears that most of the concepts de-
fined by reference to the responses of human in-
struments are of very limited theoretical import
—they do not give rise to precise and comprehen-
sive generalizations.^
As indicated previously, if an extensive
accounting property cannot be identified,
we must conclude that accounting can
never be classified as a measurement dis-
cipline in the strict sense. This conclusion,
however, does not mean that the benefits
described above cannot accrue to account-
ing. Accounting can still be explained and
improved via measurement theory if ac-
countants are willing to choose an economic
property which is possessed by accounting
phenomena and monetary units that ap-
proximates extensiveness and are willing
to assume that the property is extensive.
One property which is feasible for account-
ants to choose is purchasing power.^^ As
defined in this paper, the concept of pur-
chasing power is very similar to Chamber's
current cash equivalent.*" The measure-
ment of purchasing power, however, as-
sumes no substitution of monetary units
as does the measurement of current cash
equivalents^' and does not enforce the use
»Hempe), op. cit., p. 62.
"" Demonstrating the proximity of purchasing power
to extensiveness is accomplished by using the "market"
as abalance to show that objects which possess pur-
chasing power frequently satisfy and almost always
come close to satisfjang axioms of extensiveness.
" See Raymond J. Chambers, Accounting, Evalua-
tion at>d Economic Behavior (Prentice-Hall, Inc., 1966),
" An analysis of the artificfalness of the combining
operation implied by the nieasurement of current cash
Vickrey: Accounting—A Measurement Discipline?
of a monetary standard. Thus, assuming
extensiveness, the measurement of pur-
chasing power is theoretically sound from
the point of view of measurement theory
whereas the measurement of current cash
equivalents is not. If accountants are not
willing to make such an assumption, we
must abandon our attempts to apply mea-
surement theory to accounting and we
must look in other directions to improve
and to explain accounting.
SUMMARY AND CONCLUSIONS
If accountants are not willing to choose
an economic property for accounting mea-
surement which approximates extensive-
ness and to assume that the property is
extensive, they must abandon their at-
tempts to improve and to explain account-
ing via measurement theory. This conclu-
sion was reached while fulfilling the princi-
pal objective of this paper, identifying the
necessary and sufficient conditions for ac-
counting being classified as a measurement
discipline. The conditions which entail and
are entailed by accounting being a mea-
surement discipline were identified by (1)
an analysis of modern measurement theory
and (2) an analysis of the quasi-measure-
ments which accountants perform. These
analyses indicate that if accountants wish
to represent economic facts about account-
ing entities by assigning monetary amounts
to accounting phenomena and aggregating
these amounts as they have done in the
past, accounting is a measurement disci-
pline if and only if at least one extensive
economic property is identified which (1)
is possessed by accounting phenomena, (2)
is measurable in standard monetary units,
and (3) is accepted by accountants as ap-
propriate for accounting measurement. If
these conditions are realized, many benefits
could accrue to accounting, including the
explication of numerous accounting con-
cepts, the identification of criteria for
choosing between alternative accounting
741
principles and procedures, and the im-
provement of our ability to communicate
the essentials of accounting theory to stu-
dents. The identification of an extensive
accounting property, however, seems im-
probable since we know of no instrument
capable of demonstrating conclusively
whether or not accounting phenomena
satisfy axioms of extensiveness with re-
spect to economic properties. If such a
property cannot be identified, accounting
cannot be recognized as a measurement
discipline in the strict sense required by
measurement theory. Even if accounting
cannot be described as a measurement
discipline in the strict sense, the benefits
mentioned above can accrue to accounting
if accountants are willing to make one
assumption. Thus, if accountants are will-
ing to choose an economic property for
accounting measurement which can be
shown to be close to extensive and are
willing to assume that the property is ex-
tensive, accounting can still be improved
and explained by way of measurement
theory. A logical property for accountants
to choose is purchasing power, a property
which is close to extensive even when mea-
sured by human instruments in an imper-
fect market.
BiBLIOGKAPHY
Books
Norman R. Campbell, Foundations of Science (Dover
Publications, Inc., 1957).
Raymond J. Chambers, Accounting, Evaluation and
Economic Behavior (Prentice-Hall, Inc., 1966).
Brian Ellis, Basic Concepts of Measurement (The
Syndics of the Cambridge University Press, 1966).
Carl C. Hempei, Fundamentals of Concept Formation in
Empirical Science (The University of Chicago,
1952).
Yuji Ijiri, The Foundations of Accounting Measurement
(Prentice-Hall, Inc., 1967).
Richard Mattessich, Accounting and Analytical Methods
(Richard D. Irwin, Inc., 1964).
equivalents is found in Kermit D. Larson and R. W.
Schattke, "Current Cash Equivalent, Additivity, and
Financial Action," THE ACCOUNTING REVIEW (Octo-
ber 1966), pp. 634-641. The nondesirability of artificial
combining operations is explored in Hempei, op. dt.,
pp. 75-77.
742
Articles and Periodicals
Harold Bierman, Jr., "Measurement and Accounting,"
THE ACCOUNTING REVIEW (July 1963), pp. 501-507.
Peter Caws, "Definition and Measurement in Physics,"
Measurement: Definition and Theories, Edited by
C. West Churchman and Philburn Tatoosh (John
Wiley & Sons, Inc., 1959), pp. 3-17.
Kermit D. Larson, "Implications of Measurement
Theory on Accounting Concept Formation," THE
ACCOUNTING REVIEW (January 1969), pp. 38-47.
Kermit D. Larson, "Descriptive Validity of Accounting
Calculations," THE ACCOUNTING REVIEW (July
1967), pp. 480-488.
Kermit D. Larson and R. W. Schattke, "Current Cash
Equivalent, Additivity, and Financial Action," THE
ACCOUNTING REVIEW (October 1966), pp. 634^641.
Ronald S. Lim, "The Mathematical Propriety of Ac-
The Accounting Review, October 1970
counting Measurements and Calculations," THE
ACCOUNTING REVIEW (October 1966), pp. 642-651.
Ernest Nagel, "Measurement," Philosophy of Science,
Edited by Arthur Danto and Sidney Morgenbesser
(The World Publishing Company, 1966), pp. 121-
140.
S. S. Stevens, "On the Theory of Scales of Measure-
ment," Science (June 7, 1946), pp. 677-680.
S. S. Stevens, "Measurement, Psychophysics, and
Utility," Measurement: Definitions and Theories,
Edited by C. West Churchman and Philburn Ratoosh
Qohn Wiley & Sons, Inc., 1959) pp. 18-63.
Patrick Suppes and Joseph L. Zinnes, "Basic Measure-
ment Theory," Handbook of Mathematical Psychology
Vol. I, Edited by R. Duncan Luce, Robert R. Bush,
and Eugene Galanter (John Wiley and Sons, Inc.,
1963), pp. 1-76.