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Archives of Business Research – Vol. 10, No. 5

Publication Date: May 25, 2022

DOI:10.14738/abr.105.12289. Pérez-Benedito, M. A. (2022). Explaining Accounting Structures Changes by Applying the Accounting Methodology of Radar-Polar

Chart. Archives of Business Research, 10(05). 39-64.

Services for Science and Education – United Kingdom

Explaining Accounting Structures Changes by Applying the

Accounting Methodology of Radar-Polar Chart

Migue Angel Pérez-Benedito

Faculty of Economy, University of Valencia, Valencia, ES

ABSTRACT

The manuscript analyzes the relationship between the dynamic activity of entities

and its effects on accounting structures of their financial statements. Radar charts

and tetragrams visually represent the dynamic activity of features, respectively. To

overcome discrepancies in qualitative and quantitative comparative analysis, the

manuscript introduces polar equation parameters that drive research towards

qualitative analysis. Classes of management – kinds and types - are conductor

threads for explaining relations between charts and diagrams, and level of

employment as well as market prices are environment variables for confirming

hypothesis of manuscript. The Euclidean distances of the accounting relative

centers in the tetragrams and the management optima are indicators developed for

both stakeholders and managers to explain the evolution of decision making over

time. The accounting applied is an economic science.

Keywords: Accounting methodology; Economic behavior; Radar charts; Piper diagrams;

Clusters.

INTRODUCTION

The adaptation of human action to the environment where the entities are located supposes

making-decisions according to the change of cultural factors [1] [2] y [3]. The accounting

transforms economic, financial, and monetary transactions into accounting transactions, and

therefore financial statements are a synthesis of human action that reports on the activity of

entities in the markets along a period, since the valuation of the transactions recorded in an

accounting system is one of the main objectives of this science [4] y [5]. The latter is the reason

why human action can be valued economically, financially, and monetarily, and at the same time

it can be measured quantitatively and qualitatively. The indicators obtained from geometric

figures and tetra-diagram - adapted Piper diagrams –, allowing us to perform both analyzes on

the activities of an entity. Thus, an observer must be able to understand the financial situation

of the entities and know the way in which making-decision has been managed. On the other

hand, as a methodology that analyzes the behavior of Homo economicus, it can be applied in

other sciences that share the same research object.

The first works in the analysis of the economic behavior of León Walras research exchange

values for explain general equilibrium of economy [6] y [7]. The application of the double entry

principle in the accounting record of national transactions proposed by Irving Fisher [8] is

included in System of National Accounts 2008 (2008 SNA) of United Nations (UN) [9], which is

a statistical framework that provides a comprehensive, consistent, and flexible set of

macroeconomic accounts for policymaking, analysis, and research purposes. The radar chart

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Archives of Business Research (ABR) Vol. 10, Issue 5, May-2022

Services for Science and Education – United Kingdom

accounting methodology measures the dynamic activity of entities through the internal

relationships of their angles, depending on the class (kind and type) of management that it

represents. The axes of a radar chart are the average periods of maturaty of a company.

Consequently, changes in a period have effects in the consume, sales, and financial activities at

the same time. The effect of dynamic activity on accounting financial statements is explained by

tetragram – Piper diagrams adapted - to inform stakeholders about activity performed.

The observer is the main actor in this methodology because their perception of the

management results influences on their decision to stay or not in a common project. According

to this aim, the manuscript has considered contributions on the role that medical image

perception research [10], the development of deep-learning-based methods for their

capabilities in analyzing complex visual data and inferring valuable insights [11], the research

that confirms 50% of our brain function is dedicated to find and interpret visual information

[12] and the development and implementation of a custom-designed Excel-based visual

management [13]. The accounting structures of balance sheet as well as profit and losses

account are Gibb’s triangles to form Piper’s diagram adapted to aims of this research, which

inform about economic and financial positions of entities and results of their activity.

The manuscript explains the application of the accounting methodology on sample of seven

non-financial entities listed in the Dow Jones Industrial Average and Nasdaq-100. According to

aims of the manuscript, the management optimums justify the accounting structures adopted

by the companies in their activity, which are represented in tetragrams. So that, there is a cause- effect among classes of management and accounting structures of balances and results. The

radians obtained from the relationships by ratios between the Euclidean distances in the radar

charts and the tetragrams justify why they be the guiding thread of this research.

The Accounting Methodology of Radar-Polar Chart

Perimeter Distances

The management of companies are human actions on continued activity of entities.

Nevertheless, location of companies, perturbations of markets, means of communication,

political decisions are factors which define economic, financial, and cultural environments

where entities make transactions and decisions. The average periods measure the dynamic

activity of entities, and these variables are axes of radar charts (polar) to research geometry

figures generated. Entities in the same sector do not have to adopt the same kind and type of

management. The accounting methodology applied in the research explores this topic,

evaluating the management of companies through angular indicators generated from a radar

chart. These geometric figures are the different classes of management generated from decision

making. The perimeter distances between axes are tension between maturity periods and a

change on one of them has effects in several management activities of a radar-polar chart at

same time. The number perturbations without repetition of perimetral distances are classes of

management generates, which depend on numbers of activity that researcher likes to assess.

The manuscript assesses three activities on radar charts, according to average periods

obtained. The graphic of radar charts of Amgen Incorporated are on figure 1 for three period of

maturity: sales (pv), payment (pp) and collect (pc). These periods measure dynamic activity of

companies obtained from next equation, which measure the speed of transactions in a period.

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Pérez-Benedito, M. A. (2022). Explaining Accounting Structures Changes by Applying the Accounting Methodology of Radar-Polar Chart. Archives of

Business Research, 10(05). 39-64.

URL: http://dx.doi.org/10.14738/abr.105.12289

����� = !" $% &"

'()*+) = -./

0/ (1)

�� = -./∗'()*+)

!" $% &" (2)

In the Equation (1) and (2) ET and FT are values of economic and financial transactions in an

annual period (365 days), BVk is the value of the simple interannual averages of the accounting

balance variables that do not leave the economic, financial, and monetary domain of the

companies at the end of the fiscal year, and generated from Et and FT. These Balance Variables

(BV) are stock inventories, debtors, and creditors, which allow to obtain respective periods of

sales (pv), collect (pc) and payment (pp). The index K takes words v, p and c, according to nature

of transactions and balance variables. The axes of radar charts in figures 1 and 2 are the sales

period (pv), collect period (pc) and payment period (pp), and perimeter distances between pv

and pc is DPV for sales activity, DPC is distance between pv and pp for consume activity and

DPT is distances between pc and pp for treasure activity.

Figure 1. Radar chart of Amgen

Incorporated

Figure 2. Radar chart of Cisco Systems

Inc

The accounting information consolidated of Amgen Incorporate allows to obtain radar charts

(classes of management) in Figure 1 and radar charts of Cisco Systems Inc are in Figure 2. The

management classes that can be generated are in table 1.

Table 1. Classes of management

DPT>DPC>DPV (1F) DPC>DPT>DPV (1M) DPC>DPV>DPT (1E)

DPT>DPV>DPC (2F) DPV>DPT>DPC (2M) DPV>DPC>DPT (2E)

Companies (entities) can sell their product by two financial strategies, giving credit to

customers or obtaining debt from creditors. The first strategy is figure 2 and is marked by (2)

on second row of table 1 when DPC is higher than DPV. The second strategy is figure 1 and is

marked by (1) on first row of table 1 when DPC is lower than DPV. The perimeter distance of

treasure (DPT) can be on the first (F), intermeddle (M) or end (E) position, explaining tensions

on treasure activity. The classes of management adopted by companies of sample are on table

2 in ten period of study.