The evaluation of inventories is of considerable importance for purposes of both the balance sheet and the income statement. In the former, the inventory evaluation influences the current-asset total, the grand total of all the assets, and the surplus figure; in the latter, the inventory evaluation materially influences the figures for cost of goods sold and for net profit. The general rule for purposes of balance-sheet evaluation is that assets should be exhibited at cost, whereas for purposes of the income statement the general rule has held that evaluations should be on such a basis that profits (and operating business losses) will be taken up only on the basis of sales. These rules are interrelated, as well as consistent with the concept of historical accounting. Departure from them represents a violation of realized, experiential accounting and must be Justified on other grounds. Notwithstanding these general rules it has long been. Considered good practice to evaluate the inventories on the basis of cost or market whichever is lower, thus frequently exhibiting the asset at less than cost.

This article says that income in general, is a variable concept concerning which there has been considerable debate without a great deal of final agreement. Within the framework of historical accrual accounting, however, if allowance is made for variations in procedure and for different methods of computation, the concept of income appears to be accepted as indicative of something fairly specific. There is ground for believing, nevertheless, that this is not an entirely satisfactory concept of the income situation. In economics and in the vernacular the term "income" usually refers to goods and services. The emphasis is upon assets, often more specifically upon cash, rather than upon the resulting technical accounting increase of a specific equity. Expense and revenue items, in their deeper meaning, have reference to cash effects. From the standpoint of historical accounting, gross income, in this sense, is the amount of cash received and to be received as a result of the period's sales.