Abstract In the seventeenth century the chamber of London, England, was something more than a city treasury. Indeed, its primary function, the care of orphans' funds, was more social than economic. In the period before the rise of banking, the chamber was an important lending institution, a source of working capital for the trading companies and merchants of the city. Its effect upon national expenditure, while indirect, was at times considerable, for citizens whose money was tied up in commercial ventures often borrowed money lent by individual to the king from the chamber. On the other hand, it provided an investment outlet on a short-term basis when the city, needing cash for the management of its own affairs, occasionally must borrow at four to eight per cent for six months or a year. And of course it served the usual function of a city treasury in receiving taxes, fees, fines and rents and in paying salaries and maintenance costs. Until revenue far in excess of that in the decade preceding the Civil War could be assured, the chamber of London must continue to sink ever deeper into debt.

Abstract It is always difficult to disagree with the logic of an argument presented by Professor W. A. Paton. His article published in the January 1949, issue of the journal "The Accounting Review," presents a devastating barrage of reductio ad absurdum, invective, and fascinating wit, which may too readily be accepted by his readers. The issues at stake should be drawn dearly. Irrelevant comments and argument based upon false assumptions should be discarded before there is any disposition to repudiate the statement, Accounting Concepts and Standards Underlying Corporate Financial Statements. It should not be assumed that because of insistence upon the use of recorded cost as the only available objective information there is any suggestion of belief in or advocacy for the proposition that careful consideration should not be given to important changes such as may be found in price level changes and many other considerations. However, such considerations lie wholly beyond and outside of the area of basic corporate financial statements and at the same time may be said to lie within the area of managerial judgment, investment analysis, and interpretation. In the latter area, it is to be assumed that the accountant of integrity, competence and social responsibility may make a valuable contribution.

Abstract A recent survey by the Controllership Foundation to ascertain the public's acceptance of the facts and figures of business accounting disclosed several facts. The accountant is also confronted with the possibility that over-simplification of financial statements might easily result in confusion rather than clarity. The top managements, the controllers, the public accountants, the educators, the American Institute of Accountants, and the Controller's Institute of America have tremendous responsibility and an opportunity during the next five years to make the corporate annual report the keystone or media of communication to correct public and employee concepts of American business. Hence, improvements in financial statements and annual reports may well be the result of trial and error and certainly requires the exercise of good judgment and knowledge if continued improvement is to be had; innovations for innovation's sake are not satisfactory. Therefore, the controller and the public accountant are presented with a continuous challenge and grave responsibility to make the annual report more valuable and informative by their influence on its content and preparation; only through these combined efforts will the annual report gain the confidence of the public, labor unions, the investors and top management.

Abstract Committee of Accounting procedure of the American Institute of Accountants in Bulletin No. 35, dealing with the method of presentation of income and earned surplus, makes the recommendation that the net income for the period be shown henceforth without deductions or additions of items which are properly excluded from the determination of net income. These items consist primarily of charges and credits with respect to the following general purpose contingency reserves, discussed in Bulletin No. 28, inventory reserves, discussed in Bulletin No. 31, extraordinary items which, if included, would impair the significance of net income, discussed in Bulletin No. 32 and excessive costs of fixed assets and appropriations in contemplation of replacement of facilities at higher price levels, discussed in Bulletin No. 33. There is no argument with respect to items mentioned in Bulletins 28, 31 and 32 and it is gratifying that the committee recommends the exclusion of such items in the determination of corporate net income.

Abstract The primary problem in the determination and interpretation of income during a period of rapidly increasing prices is caused by the matching of revenues at current price levels with costs which represent the expiration of assets acquired at materially lower price levels. Expenses or costs chargeable against revenue during an accounting period may be divided into two categories: those which arise from a current disbursement of cash or the incurrence of a liability, and those which represent the using up of assets which were acquired in a previous period. When the benefits derived from a particular item of expense, such as sales salaries, are deemed to be realized at about the same time the expenditure is incurred, the purchasing power of the dollars of revenue and of the dollars of expense may, for practical purposes, be considered to be the same. When, however, the benefits derived from the consumption of an asset acquired in a previous period are matched against revenues of the current year the dollars of revenue and of expense which are being compared do not have the same values.

Abstract The systems of accounts for public utilities have been revised more or less extensively since 1937. Of the several interesting features embodied in these systems, one particular innovation, the original cost procedure, really deserves more careful attention than accountants have seemed willing to give it. The principal advocate (but not the originator of the idea) of the original cost procedure for utility systems of accounts has been the Committee on Statistics and Accounts of the National Association of Railroad and Utility Commissioners (NARUC). The original cost procedure ingeniously utilizes accounting techniques to isolate and emphasize information which the regulatory authorities have said they must have in order to discharge their regulatory functions adequately. Depreciation is universally prescribed for public utilities in modern uniform systems of accounts. This requirement raises the interesting question of whether the acquisition adjustment account is to be subjected to similar periodic write-off. The system, in fact, does provide that the amounts recorded in this account with respect to each property acquisition shall be depreciated, amortized, or otherwise disposed of, as the Commission may approve or direct.

Journal Article Reciprocal Demand and Increasing Returns Get access R. C. O. Matthews R. C. O. Matthews Cambridge Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 17, Issue 2, 1949, Pages 149–158, https://doi.org/10.2307/2295870 Published: 01 January 1949