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To this day, triple‐entry accounting and momentum accounting are seldom applied. We regret this because of the growing need for more forward‐looking information by management and external stakeholders and the apparent lack of theory and practical solutions. The ever‐increasing pace of the economy incites the need to disclose trends on the microeconomic level of a company. Further to this point, recent developments related to corporate governance, give new imputs to search for the answer to the question if we can improve the reliability and effectiveness of accounting in general, and financial statements in particular. This paper may contribute in to a better understanding of the concept that underpins momentum accounting. We present a notional example concerning the balance sheet ratio: return on equity. This example, so we hope, should encourage practitioners and academics to explore the usability of triple‐entry accounting and momentum accounting as alternative means to provide more forward‐looking information.

This article has been withdrawn as it was published elsewhere and accidentally duplicated. The original article can be seen here: 10.1108/09657960410514661. When citing the article, please cite: Eric Melse, (2004), “Accounting in three dimensions: a case for momentum”, Balance Sheet, Vol. 12 Iss 1 pp. 31 - 36.

This paper aims to extend an earlier analysis of the profitability of an individual firm operating in the professional services industry from the perspective of the triple‐entry framework of the momentum accounting theory of Yuji Ijiri.

The paper presents a “common‐size‐format” model of balance‐sheet momentum, an approach typical of financial statements' mathematical analysis.

Common‐size‐format momentum ratios offer an alternative measurement of (the change of) business performance. They model stabilizing phenomena that might develop very differently from ratios like return on total assets or return on equity and thus provide important informational signals to the analyst of financial statements. The common‐size‐format ratio of net wealth momentum herein discussed is proposed as a supplemental measurement for business performance analysis.

The paper discusses a new method for performance measurement and risk analysis.

The growing need for more relevant detail in financial statements proper to be produced annually, quarterly or monthly, and possibly continuously, translates into an urgent need for more advanced methods and tools for trend analysis. This paper takes a broader view at balance sheet analysis. We observe balance sheet items at the highest level of aggregation and compare them with the next level of detail. This exposes a multidimensional structure produced by all balance sheet items and their time points. This innovative approach to balance sheet analysis provides a new method to determine the relevance and materiality of accounting information. Instead of computing accounting ratios separately, we apply multivariate analysis as to explore the “data space” of the balance sheet of our example company: 3M. We study ten‐years of quarterly balance sheets and discuss some trends by comparing scatter plots with spectral map analysis – spectramap for short – and color coding to expose latent variables hidden in this data. We substantiate that we can explain the larger part of variance present in balance sheets in a more meaningful manner. This paper also seeks to corroborate the generality assumption that underlies the structure of the balance sheet. We strive to increase the usability of balance sheet data and underpin its explanatory power.