Application of Mathematics in Accounting

Mathematics has been employed in accounting for centuries. It was included in the double entry system in the Luca Pacioli's mathematics book. Although, Luca Pacioli codified the double-entry systems which are based on the basic accounting equation: Assets = Liabilities + Equity, but has not so far, received appropriate attention in the development of modern accounting. The expanded accounting equation employed nowadays is considered a black-box, and there have been no significant improvements to the equation. This paper outlines the importance of the accounting equation in identifying the limitations of current accounting standards, particularly the definition of the elements of financial statements. Furthermore, this paper argues that the approach employed in the definitions of the elements of financial statements should be on the basis of information-base, instead of the use either the balance sheet or the income statement approach. Finally, the aim of this paper is to suggest that the application of mathematics in accounting be dealt with so that accounting will make a significant contribution to the academic world.