ABSTRACT
The modern asset accounting principles originated in the nineteenth century, but these principles together with consistent practices were accepted only slowly in business practice. An important reason for the sluggish acceptance of a particular set of accounting principles is that a firm would be expected to determine its business practices according to its own criterion of usefulness in the absence of any institutional compulsion toward a specific form of behavior. Nineteenth-century accountants were deeply concerned with legal decisions that related to accounting principles and practices. Indeed, nineteenth- and early twentieth-century accounting texts contained numerous references to the law and particularly to dividend law. Although accountants had definite opinions on the treatment of depreciation, their responsibility and authority in financial matters were rather vague. The chief care of the auditor, in some cases was to 'test the reality of the assets;' but the problem of distinguishing expenditures which should be capitalized was not always in the auditor's province.
