The article discusses contemporary theories of corporate profit recording. Every substantial rise in prices brings with it many problems and many suggestions of economic reform. After World War I there was a strong movement for the stabilization of the dollar. The fluctuating dollar was the culprit, and legislation was proposed to stabilize prices by varying the gold content of the dollar. Since World War II accounting seems to be the chief culprit, and many stimulating articles have been written to this effect. Accounting is said to contribute to price inflation in two ways: (1) by providing misleading information upon which wage demands are based, and (2) by creating false optimism on the part of business men. One of the most recent criticisms of conventional accounting methods that has come to this writer's attention is that of Roy A. Foulke in his pamphlet, A Study of the Corporate Theory of Profits.' Mr. Foulke believes that accounting should account for economic values and for real profits. MacNeal recognizes that the term economic value is synonymous with market value when he states:".. . the economic value of a thing is its market price and that alone." At the other extreme is the only adequate method yet suggested for reporting real income, that presented by Sweeney in his book Stabilized Accounting.

Many accountants have long been dissatisfied with the valuation hypothesis. It has not only resulted in wide variations in actual practice but has failed to provide principles from which we can reason logically and arrive at conclusions that correspond with observable facts. As the accountant faces unfamiliar problems, he cannot meet them by applying principles of valuation; he has to learn how to handle these individually. His first ideas on accounting are conveyed to him in terms of valuation; but he soon learns that accountants do not usually practice valuation but account for a certain type of costs. The valuation hypothesis can be proved to be false by demonstrating that it does not correspond with observable facts. All one need do is consider his own experience, and he will realize that accountants practice valuation only in exceptional instances. The Executive Committee of the American Accounting Association has for many years been working on the unsatisfactory situation in accounting theory, and as is well known has produced two reports, both considered tentative. In these reports the Committee has adopted, among others, two hypotheses: (1) that accounting is primarily a process of accounting for monetary outlay costs; and (2) that it is a process of matching costs with revenue.