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The Great Accounting Debate

By August 27, 2017News

Do you love the concepts of accounting, but just can’t see yourself slaving over tax forms and balance sheets for the rest of your life? Well there might just be hope for you after all and your salvation may come in the form of being an accounting professor. So now you might be saying to yourself, how is teaching about tax forms and balance sheets any better than working on them directly? To answer this question, you don’t need to look any further than this year’s winner of the Accounting Literature Award, Panos Patatoukas, an associate professor at the Haas School of Business at U.C. Berkley.

Professor Patatoukas researches and theorizes about controversial topics in accounting (because, you know, money is always something to argue about). The paper which won the award analyzes a concept called Customer-Base Concentration. Is his paper he discusses a question which has many sides to it: What is better for a business, to have a few very big customers, or very many smaller customers?

Until this paper came out, it seemed as if conventional knowledge dictated that having a diversified customer base was the most reliable approach for a company to take, since no one product line or service in a given company was critically reliant on just a few customers. However, Professor Patatoukas argues that companies that have several large customers (think Procter and Gamble and store chains like Wal-Mart and Target) might benefit from squeezing out inefficiencies in their production models in order to maximize profits from their major purchasers. Professor Patatoukas backs this up by analyzing the stock performance of companies with different customer bases.

So which side of the argument do you fall out on? What other theoretical accounting concepts can you think of? You may have the key to transforming business practices and it can all start with an education in accounting.

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