When Neutron Stars Collide

When Neutron Stars Collide

Artist’s illustration of two merging neutron stars.
National Science Foundation/LIGO/Sonoma State University/A. Simonnet., CC BY-SA

Don’t you feel privileged to have been alive when humanity first observed two neutron stars collapsing into each other? I was awestruck to read last week of the collision 130 million years ago.

Two Manhattan-sized stars, each with a mass more than that of our sun, spiraling into each other and sending ripples into space… incredible.

We accountants look to the universe for metaphors to explain our own science. Like the Big Bang marked splitting of matter from antimatter, accounting has its own duality. 

Every accounting story is told from the point of view of an entity. You can think of this entity as a box, which always starts empty. 

Then the box fills with assets and liabilities, analogous of how matter and antimatter filled the universe. That’s what every balance sheet is… a container of assets and the matching obligations to the funders of the assets.

It’s really very simple.

Having a clear conception of the origin of the balance sheet lays down what we call a 'platform of understanding' for business acumen education. We can then go on to explain all sorts of applied business matters. For example, how valuation of assets is subjective.  

The neutron stars reminded me of that fact. Their collision sprayed out more gold than the mass of the earth. The precious metal's not so scarce after all! 

Value truly is in the eye of the beholder.

Peter
Picture
An artist's impression of gravitational waves generated by binary neutron stars. 
Credits: R. Hurt/Caltech-JPL