The article discusses the accounting treatment of accelerated depreciation and rate regulation. The Federal Communications Commission has recently been investigating whether or not American Telephone and Telegraph Company should be forced to use accelerated depreciation for tax purposes. There have been drastically different points of view presented as to the consequences that would result if the company were to use such procedures combined with a policy of continuing to use conventional depreciation for rate regulatory purposes. This article compares the "flow-through" and "normalization" accounting methods. The purchase of a long-lived asset gives rise to benefits extending over the future and that these benefits may be measured in terms of cash flows. At any moment in time the present value of all the future cash flows associated with an investment is a measure of the value of the asset. The taxes saved in the early years are likely to be paid in the later years. The advantage of using accelerated depreciation is that the firm may use the funds that are saved in the time periods before the additional taxes are assessed. The use of accelerated depreciation would result in a shift of benefits from the Treasury to the consumers of the services of the public utilities.

This article focuses on the income concept, which deals with many major accounting problems. The main focus is on two general concepts, income as an increment in value and income as a predictor of earnings. These may be useful in resolving some problems of income measurement. An understanding of these two concepts may also be helpful in deciding questions of presentation of financial position. The theories underlying income measurement and financial position presentations are, of course, completely intertwined. In practice, the measurements of income and financial position are also fled together, but not always in a beneficial manner. Too frequently the accountant approaches a transaction and chooses the method for recording it that better measures income or better measures the financial position of a corporation. In this paper the author will develop a means of evaluating different ways of recording transactions, without compromising on the quality of either the measure of income or financial position.