Abstract
This paper discusses the influence of accounting on economic system classification. Particularly, it traces how a misconception of the accounting term ‘capital’ led to a misleading characterization of capitalism and socialism as inherently oppositional economic systems. This misunderstanding stems from neglect of the two complementary modes of thought on which accounting as a science rests: reasoning, which is the conceptual, idealistic dimension, and proving, which is the technical, physicalist dimension. Both modes are integral to the construction of most of the accounting terms used in economics. If an accounting conceptualization had been followed, capitalism and socialism would not be seen as inherently contradictory. Capitalism refers to an economic system based on capital as a process of transforming resources, while socialism can be interpreted as an extension of this logic in which ownership is distributed among multiple participants in the formation of entities. From this perspective, the two systems are not oppositional. This paper contributes to the accounting literature by extending the conceptualization of capital and introducing assetization and liabilitization as a foundation for linking accounting thinking with economic system classification. The paper finds that accounting is not only a technical issue but also scientific tool for crafting and designing economic activities. In addition, it demonstrates that the different economic systems that have been advocated for years, are not in fact different but complementary. Hence, there is a coexistence of capitalism and socialism.
Recommended Citation
Chalu, Henry
(2026)
"Accounting and economic system classification: An adverse effect of the misconceptualization of capital,"
Business Management Review: Vol. 29:
No.
1, Article 10.
Available at: https://doi.org/https://doi.org/10.65085/2546-213x.1023
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