Just as the feedback concept is the single most essential characteristic of the system dynamics approach, so accounting feedback is the most crucial basis of Accounting Dynamics (AD), a methodology for modeling and simulating accounting using system dynamics. In this presentation, we focus on accounting feedback.We should like to emphasize that accounting information has essentially feedback characteristics and that its origin can be traced back to the laws of Hammurabi. Since that time, the concepts of stewardship and accountability, for which accounting measurements are exclusively addressed, have formed the feedback nature of accounting information and effectively controlled resource allocation in social systems.Conceptually, accounting feedback has three aspects, which correspond to the stages of AD model development. They are the formal requirements of double entry bookkeeping,  institutional regulations in financial statements and the real functions of accounting information performing feedback control over the economic resources. Formal feedback is the intrinsic nature of the account system. Based on double entry bookkeeping, the account system of an economic entity constitutes a constantly balanced closed system. Data entry into the account system must automatically occur twice so that the system is always balanced. This account system with debtor and creditor sides provides the formal requirements of accounting feedback.Institutional regulations reflect generally accepted accounting principles. From the viewpoint of society as a whole, they introduce an approach of total optimization into individual accounting feedback. From the feedback viewpoint one of the most typical accounting principles is the principle of continuity, which forces continuous observance of the same accounting rule over consecutive accounting periods. Once one uses the straight line method of depreciation, for example, one must use it in the next period. Institutional accounting feedback substantially constrains business income.Finally, the resource allocation feedback aspect of accounting information implies the real function of accounting in social system. Investigating the actual conditions of resource allocation in social systems through accounting feedback control is the very core of Accounting Dynamics. How is resource allocation in our society effected by accounting information? The answer to this question is the ultimate objective of our research.

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• 1991

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• Document

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System Dynamic Society Records

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• This collection is part of the University Archives